-^  y, 


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^^^  y^  ^^^^^cL^ 


THE  NEW  PHILOSOPHY 
OF  MONEY 


A  PRACTICAL  TREATISE  ON  THE  NATURE 

AND  OFFICE  OF  MONEY 

AND  THE  CORRECT  METHOD  OF  ITS  SUPPLY 


BY 

ALFRED  B.  WESTRUP 

Author  of  '■'■The  Finmicial  Problem''^  and  '^^ Citizens'  Money 


ALFRED  B.  WESTRUP. 

'^  MINNEAPOLIS 

470  SYfiDfcAltBaJfiaiD^ PUBLISHER 

IS95 


COPYRIGHT,  1895 

BY 

F.  E.  LEONARD 


iJ  ...  V\G- 


CONTENTS. 

Preface,         .........  7 

Introduction,  ......  .  .  9 

A  Synopsis  of  the  Philosophy  of  Money  herein  presented. 

General  Effect  of  the  Artificial  Limit  to  the  Volume  of 

Money,     ......  .         .  ig 

The  effect,  in  case  facilities  are  provided  for  an  abundant  supply 
of  money  contrasted  with  that  resulting  from  the  existing  artifi- 
cial limit The  present  money  a  makeshift,  not  the  result  of 

provision  for  a  medium   of   exchange The   business  people, 

and  not  money-lenders  should  make  provision  for  a  medium  of 
exchange,  pure  and  simple Interest  in  such  a  medium  is  uni- 
versal. 

Exchange,  ........  24 

The  indispensability  of  money Who  should  provide  it An 

all   cash  system;   hence  book   credits   abolished  and   bad  debts 

avoided The  Mutual  Credit  System  irresistable Will  defeat 

all  opposition. 

Not  Enough  !Money,  ......  28 

Money  being  artificial,  its  supply  can  be  increased It  results 

in  a  credit  system  that  is  destitute  of  principle A   matter  of 

guesswork Its  supply  by  banks  a  matter  of  favoritism   and 

uncertainty,  engendering  false  pretense   and  defeating  honesty 

The  relation  of  volume  of  money  to  prosperity,  justice  and 

morality The  supply   of   money Postponing   pay-day 

The  transferability  of  secured  and  unsecured  credit The  sub- 
stitution of  the  former  for  the  latter. 

Too  Much  Money, .32 

The  most  perfect  elasticity  under  the  Mutual  Credit  System 

Neither  too  much  nor  too  little Inllation The  gold  re- 
demption superstition The   abandonment   of   all  commodity 

money  a  necessity Establishment  of  a  credit  monev  system 

indispensable  to  progress. 

Cheap  !Money,  .  .....  '35 

A  review  and  criticism  of  articles  published  in  the  "Century 
Magazine." 

The  "Per  Capita"  Delusion,  .         .  .         .         39 

The  Treasury  Report  on  circulation    unreliable Twentv-five 

dollars  per  capita,  but  only  one   dollar    in    circulation  for  every 


389182 


4  CONTENTS 

sixty-six  dollars  of  wealth Interest  of  borrowers  and  the  com- 
munity not  served  by  the  per  capita   theory The  number  of 

times  in  a  year  that  all  money  must  pass  into  the  hands  of  capi- 
talists and  government  officials,  besides  performing  the  ordinary 
functions  of  a  medium  of  exchange. Are  they  knaves  or  fools? 

Credit,  .........         43 

Importance  of  correct  definitions  and  their    mutual    acceptance 

Several  new    definitions Secured   and    unsecured    credit 

Advantages  of  the  former Credit  money  and  commodity 

money Exchanges  with  the  latter  are  barter Paper  money 

(secured  credit)  better  than  book  credits  (unsecured  credit) 

The  prevalence  of  the  latter  the  result  of  sheer   ignorance 

Quotation  from  "Mutual  Banking." 

Cost,  ......  ...  49 

Ruskin's  definition  of  cost ^Josiah  Warren,  cost  and  true  civil- 
ization  Cost    defined Capitalism    and   the    Mutual    Credit 

System Cost  should  be  the  limit  of  price. 

Value,  .........         50 

Market  or  exchangeable  value  defined Exchangeable  value  ex- 
pressed by  means  of  a  conventional  monetary  unit,  an  abstrac- 
tion  Utility  value  defined Utility  value  without  exchange- 
able value Monopoly  and  value. 

Competition,        ........         53 

A  criticism  of  the  "Twentieth  Century's"  definition The  pres- 
ent economic   system    not   "the    competitive    system" Legal 

tender  a  means  of  enslaving  the   people Control   of  money 

the    basis    of    monopoly Defeats    competition Quotation 

from  "Instead  of  a  Book" The  "Twentieth  Century's  blunder 

Foot-note  from  "Special  Legislation  the  Bane  of  Agricul- 
ture." 

Usury — Interest,  ......  "57 

The  Bible  doctrine  of  usury Its  inequity  susceptible  of  math- 
ematical demonstration The  ethics  of  interest The  obtain- 
ing of  something  for  nothing "Great  financiers"  and  political 

economists  silent  on  this  point Quotation  from  "The  Finan- 
cial Problem" Mr  Bennett's  great  article  on  the  subject A 

startling  calculation. 

"We  Must  Have  Government,"  ....         64 

An  unphilosophical  proposition Man's  ignorance,   hypocrisy 

and  audacity The   consequent   penalties Humiliating-—— 

The  beginning  of  wisdom A  thesis  of  Democracy Philis- 
tines and  foot-pads Commentaries  for  paternalists  and  moral- 
ists  We  must  have  government,  a  superstition What  does 

history  prove.' Ignorance  the  cause The  Anarchistic  phi- 
losophy  Opposed  to  the  methods  of   force Definitions  of 

anarchy Burke's    dictum Anarchists    versus  the  abettors 

of  the  methods  of  force Inexcusable  perversion   of  fact 


CONTEXTS  5 

The  inviolability  of   person   and   property The   abolition   of 

government,  a  bugaboo The  thesis — the  abolition  of  the  State 

Anarchism   and   the   bomb  tlirower The  money    power 

must  release  its  grip Government  must  cease  to  control  or 

regulate  the  issue  of  money Government  control  only  a  relic 

of  the  previous  royal  system Tom  Moore's  opinion  of  gov- 
ernment  Quotation    from    his    poem  on  corruption The 

Galveston  IVcws  on  paternalism Lewis  II.  Blair  on  liberty  and 

competition  in  monetary  affairs American  independence  an 

Anarchistic  movement "Preserve  our  institutions"  the  real 

purpose  of  government The    Wcstiiitnster'  Rcviev^^s  history  of 

money  panics  in  England Their  origin  traced  to  the  monop- 
oly of  the  Bank  of  England. 

Monopoly,  .         .         .         .         .         .         .         ,         91 

Monopoly     defined Prevailing     erroneous     notions Free 

money  an  effectual  remedy  for  all  monopoly  and  corruption. 

"Measure  of  Value,"  ......  94 

Wanted — a  champion  who  can  successfully    defend    the    dogma 

The  absurdity    shown  up Not   a  mathematical    quantity 

Redemption  by  the  "standard"  method  and  by  the  Mutual  Credit 

plan  contrasted Gold  and  its  rival The  first  time  in  history 

The  alTirmative  position  examined The  storekeeper's  money 

Redemption  by  the  two  methods  still  further  considered The 

function  of  money  and  that   of   the   denoininator  or  monetary 

unit  separate  and  distinct Controversy  between  the  editor  of 

the  Galveston  Ne-ws,  the  editor  of  Liberty,  Mr.  Wm.  B.  Du  Bois 
and  the  author. 

Controversy  with   ISIr.  Edward  Atkinson,  .  .  121 

The  Mutual  Credit  System,       .  .  .  .  .  13S 

Illustrated  by  reference  to  mutual  insurance A  danger  that 

involves  all An  unavoidable  necessity Protection  that  is 

not  available  in  the  case  of  paper   money IMoncy   different 

from,  yet  more  importaiit  than  any  other  instrument Xo  con- 
flict of  interest,  hence  the  adaptability  of  the  mutual  plan  in  the 

supply  of  money Why  Greenbackers  and  Socialists  advocate 

government  control  of  money The  error  pointed  out The 

Mutual  Credit  System  the  only  practical  way  of   carrying  out 

the  will  of  the  people Government  methods  those  of  brutes 

and  savages The  best  system  of  money  will  not  be  established 

by  government,  but  in   spite  of  it The  Mutual  Credit  Sys- 
tem not  devised  under  the  supposition  that  all  men  are  honest, 

but  because  they  are  not A  method  that  is  not  practicable 

Jumping  to  conclusions What  diminishes  burdens  and  adds  to 

comfort A  provision  against  lack  of  wisdom  and  honesty  and 

other  difficulties Uniformity  provided  for Why  the  mutual 

plan  is  preferred  in  life  insurance For  like  reasons  it  should 

be   used    in   the  supply   of   money Government   control   of 

money  a  menace  to  what  little  liberty  w-e  enjoy A  plea  for  the 

new  system The  adoption  of   honesty  as   the  best  policy 


6  CONTENTS 

The  borrowing  of  money  under  the  new  system  will  not  be  bor- 
rowing capital  as  under  the  present  sjstem;  hence  the  ground 
for  the  justification  of  interest  disappears Cost  of  issuing  pa- 
per money Ex-Comptroller  Hepburn's  testimony  on  the  sub- 
ject  The  General  Clearing-House  feature. 

Conclusion,         ........  147 

Inadequacy  of  the  present  medium  of  exchange The    most 

conspicuous  fact  in  the  study  of    economics The  alternative 

presented  by  the  "great  financiers"—- — They  have  no  solution  to 

the   money    question Criticism   of   the     Westminsfer  Review 

articles Tv.o  money  panics  are  brought  to  an  end  in  England 

by  the  issue  of  Exchequer  Bills The  superiority  of  the  Mutual 

Credit  System The  subtreasury  scheme Inconsistency  in 

the  statement  by  the  \Vestmi71ster  Review What  free  trade  in 

banking  would  inevitably  lead   to Prof.  Francis  A.  Walker 

on    bimetallism His    position     criticised Correspondence 

with  Prof.  Wm.  W.  Folwell Prof.  Folwell  criticised Pop- 
ular fallacies  considered Coin  not  acceptable  as  money  in  the 

settlement  of  foreign  balances The  origin  of  "wildcat"  banks 

How  they  could  have  been  extinguished  without  govern- 
ment control Loss  to  depositors  in    national  banks  probably 

greater  than  loss  from   "wildcat"  banks A  plea   for   liberty 

The    land  question  subordinate  to  the  money  question 

Mr,  J.  K.  Ingalls  criticised The  exchangeability  and  pur- 
chasing power  of  money The  need  of  the  hour Personal 

effort,  energy    and    thrift   unavailing Nothing   goes   but  the 

accumulation  of  wealth. 

Appendix,  .         .         .         .         .         .         .         .  184 

Articles  of  incorporation  and  by-laws  of  a  Mutual  Credit  Associ- 
ation  Explanations    regarding   the    organization  of  Mutual 

Credit  Associations  and  the  General  Clearing-House  Association. 


Note — The  figures  in  parenthesis  throughout  this  work  are  for 
the  purpose  of  calling  attention  to  the  paragraph  of  that  number. 


PREFACE. 

This  work  is  an  investigation  as  to  the  nature  and  office 
of  money;  what  constitutes  the  most  satisfactory  money,  and 
the  best  method  of  providing  for  its  supply.  It  is  necessar- 
ily, therefore,  an  exposition  of  the  errors  and  fallacies  that 
are  accountable  for  the  prevailing  unsound  notions  and  the 
apparently  inextricable  confusion  that  characterize  the  sub- 
ject, and  are  responsible  for  the  existing  absurd  money 
systems. 

The  title,  The  New  Philosophy  of  Money,  might,  per- 
haps, better  have  been  formulated,  The  Philosophy  of  Money. 
Putting  it  in  this  positive  form  affirms  that  which  it  claims 
to  be — the  correct  and  only  sound  theory  of  money.  A 
philosophy  may  be  knowledge  imperfectly  understood,  and 
contain  errors,  but  the  philosophy  of  a  subject  should  be 
knowledge  which  has  been  demonstrated.  It  should  be 
complete,  and  so  formulated  that  all  error  is  excluded.  The 
New  Philosophy  of  Money  has  been  adopted  as  the  title,  for, 
while  it  is  an  old  subject,  the  philosophy  here  presented  is 
not  only  correct,  but  it  is  new. 

The  reader  will  find  herein  treated  all  the  facts  and  the- 
ories that  have  a  bearing  on  the  subject,  including  that  diplo- 
matic phase  of  it  called  "finance." 

Heretofore,  the  end  that  should  have  been  sought — a 
faultless  medium  of  exchange — has  been  lost  sight  of;  and 
every  writer  who  has  presented  a  new  theory  of  money,  not 
to  mention  the  old  one,  has  become  entangled  with  the  dog- 
mas, State  supervision,  "measure  of  value,"  "standard  of 
value,"    and    legal    tender;   or    lost    his    bearings    and  ship- 


8  PREFACE 

wrecked  among  the  breakers — fiat  money,  wildcat  money, 
monometallism,  bimetallism,  and  the  like. 

Production  and  exchange  being  the  two  great  burdens 
that  the  constitution  of  things  imposes  on  us,  exchange  being 
fully  as  important  as  production  (because  if  exchange  stops, 
production  must  stop  also),  and  a  medium  of  exchange, 
c«//6'c/ ?/zc»;^e)/,  being  indispensable  to  the  accomplishment  of 
exchange,  what  money  will  the  most  effectually  and  econom- 
ically fulfil  its  oflice,  and  how  to  provide  it,  is  a  question  of 
the  very  first  magnitude,  if  it  does  not  transcend  all  others. 
If  the  invention  of  an  instrument  used  in  the  production  of 
only  one  article  of  the  thousands  that  contribute  to  comfort 
is  of  value  to  mankind,  how  much  more  so  is  that  instrument 
which  enables  us  to  exchange  all  those  products,  and  with- 
out which  we  could  not  enjoy  them  because  we  could  not 
possess  them?  On  this  question  of  the  best  medium  of  ex- 
change there  is  absolutely  no  conflict  of  interest.  If  it  is 
reliable  and  there  is  enough  of  it,  all  are  benefited;  no  one 
can  be  hurt  by  it.  If  it  is  unreliable,  all  are  involved  in  the 
risk,  and  all  interests  are  damaged. 

This  is  the  ground  on  which  The  New  Philosophy  of 
Money  appeals  to  the  reader  in  behalf  of  the  Mutual  Credit 
System.  The  writer  makes  no  pretensions  to  originality  or 
special  merit.  Whatever  new  idea,  term,  or  definition  may 
be  presented  here  for  the  first  time,  he  will,  no  doubt,  in  due 
time  get  credit  for.  The  allusion  to  its  being  new  has  refer- 
ence to  the  manner  of  presenting  it;  and  that,  in  the  popular 
sense,  it  is  new. 

With  grateful  remembrance,  the  author  acknowledges 
his  indebtedness  to  the  writings  of  Col.  Wm.  B.  Greene, 
E.  H.  Hey  wood,  Josiah  Warren,  and  others. 

The  Author. 


INTRODUCTION. 

1  "The  money  question"  is  a  title  applied  to  that  subject 
which  is  a  philosophical  inquiry  into  the  nature  and  office  of 
money,  and  necessarily  includes  an  investigation  as  to  how  it 
originates,  what  are  the  methods  employed  in  making  it  and 
furnishing  the  supply ;  and,  finally,  the  maturing  of  a  plan 
that  shall  correct  any  defects  that  may  be  discovered  in  those 
methods. 

2  The  terms  "money"  and  "medium  of  exchange"  are 
applied  to  that  instrument  which  is  used  to  facilitate  the 
exchange  of  objects  of  value,  and  which  is  not  the  direct 
exchange  of  objects  without  the  intervention  of  money;  this 
latter  kind  of  exchange  being  known  by  the  term  "barter" 
(8i,88). 

3  It  does  not  matter  what  this  instrument  or  medium  of 
exchange  is  composed  of.  It  is  not  the  quality  of  the  instru- 
ment that  entitles  it  to  be  called  money,  but  whether  it  per- 
forms, in  a  general  way,  the  office  or  function  of  money. 
There  has  been  a  very  great  variety  of  money,  and 
there  are  many  kinds  of  money  now  in  use  throughout  the, 
world,  and  some  of  it  is  very  poor  money;  but  to  say  that 
only  a  certain  kind  is  money,  and  that  all  others  are  only 
substitutes  for  money,  is  a  play  upon  words  and  does  not 
conduce  to  a  more  intelligent  understanding  of  the  question. 

4  There  must  be  a  general  term  by  which  we  can  desig- 
nate the  various  instruments  that  perform  the  function  of 
money.  "Money"  has  always  been  and  is  used  in  this  sense. 
Among  other  definitions  given  in  the  Century  Dictionary 
we  find:     "Any  circulating  medium  of  exchange." 


lO  THE    NEW    PHILOSOPHY    OF    MONEY 

5  There  are  instruments  that  perform  in  a  limited  way 
the  function  of  money,  but  which  are  not  called  money. 
For  instance:  a  check  on  a  bank,  a  promissory  note,  a  bill  of 
exchange  or  draft,  fulfil  the  office  of  money  in  at  least  one 
instance,  but  they  do  not  circulate  generally,  and  it  is  for 
this  reason  that  the  term  money  is  not  applied  to  them. 

6  As  to  w^hat  is  good,  and  what  bad  money,  depends 
upon  whether  it  circulates  generally  without  liability  of 
incurring  loss  to  anyone;  but  this  is  only  one  of  the  impor- 
tant items.  In  the  supply  of  money,  we  have  to  deal  with 
quantity  (volume)  as  well  as  quality.  The  supply  must 
not  only  consist  of  good  money,  but  there  must  be  enough  of 
it  (46);  and  this  is  the  item  that  all  other  theories  of  money 
have  failed  to  resolve — what  constitutes  enough — notwith- 
standing it  can  be  as  satisfactorily  answered  as  the  ques- 
tions, how  many  square  inches  in  a  given  area,  or  how  long 
it  would  take  for  a  calf  to  become  a  year  old.  It  is  not  that 
the  problem  is  so  difficult  to  solve,  but  that  the  investigation 
has  not  been  pursued  fearlessly  and  w^ith  a  determination  to 
arrive  at  the  truth.  It  is  very  evident  that  there  must  be 
some  natural  limit  to  the  volume  of  money  (14),  just  as  there 
is  a  natural  limit  to  all  material  things,  and  when  we  have 
determined  correctly  what  that  natural  limit  is,  we  shall  be 
very  much  nearer  the  solution  as  to  how  much  is  enough  (35). 

7  We  have  already  learned  that  the  office  or  function  of 
money  is  to  facilitate  the  exchange  of  products;  but  to  pur- 
sue our  investigation,  to  determine  what  is  the  natural  limit 
to  the  volume,  we  must  also  know  the  nature  of  money. 

8  The  nature  of  money  depends  upon  the  product  or 
commodity  of  which  it  is  made.  To  illustrate:  The  mar- 
ket value  of  the  commodity  of  which  coin  is  made  consti- 
tutes a  large  percentage  of  the  face  value  of  the  coin,  while 
the  market  value  of  the  commodity  that  bank-notes,  or  bills, 
or  treasury  notes  are  made  of,  is  but  an  infinitesimal  fraction 
of  their  face  value.  The  nature  of  coin  money,  then,  is  dif- 
ferent from  that    of  paper    money;   and  we  may  designate 


INTRODUCTIOX  I  I 

coin  as  commodit}'  money,  and  paper  money  as  credit  money; 
for  pajDer  money  is  really  a  form  of  credit  (9).  Now,  the 
natnral  limit  to  the  volume  of  commodity  money  is  very  easy 
to  determine.  The  limit  is  arbitrary.  The  metal  of  which 
it  is  made  is  found  only  in  limited  quantities,  and  there  is  no 
way  of  adding  to  it.  But  it  is  not  so  with  the  material  of 
which  paper  money  is  made.  It  is  practically  without  limit. 
The  supply  of  the  volume,  therefore,  however  large  it  may 
be  desirable  to  have  it,  will  not  be  hampered  by  scarcity  of 
the  material  to  make  it  of. 

9  If  it  is  not  limited  like  commodity  money,  and  if  our 
definition  relative  to  its  nature  is  correct,  then  it  is  as  such 
that  we  must  deal  with  it.  We  must  determine  its  limit  as  a 
form  of  credit;  but  as  there  is  more  than  one  form  of  credit, 
we  must  state  wherein  they  differ.  There  are  two  forms 
of  credit  (84-85);  one  is  secured  and  the  other  unsecured 
{S6).  Book  accounts  or  time  credits  are  generally  unse- 
cured credits.  A  simple  promissory  note  is  unsecured  credit, 
while  a  mortgage  note  is  secured  credit.  Paper  money  is, 
or  should  be,  secured  credit.  It  is  the  credit  of  the  party 
who  issued  it.  For  instance:  "treasury  notes"  are  the  credit 
of  the  United  States  government.  Gold  certificates  are  the 
credit  of  the  party  who  deposited  the  gold  they  are  issued 
on;  the  same  with  silver  certificates.  Bank-notes  are  the 
credit  of  tlie  bunk  that  issued  them,  although  they  are  not 
always  secured. 

10  We  have  now  arrived  at  something  definite  as  to  the 
nature  of  money.  The  definitions  given,  namely:  that  coin 
money  is  commodity  money  and  that  paper  money  is  secured 
credit,  are  strictly  true  of  the  best  of  each  kind,  and  that  is 
the  only  kind  we  can  consider. 

1 1  The  task  now  before  us  is  to  find  the  natural  limit  to 
that  form  of  secured  credit  called  paper  money.  The  ques- 
tion arises  whether  that  which  determines  the  natural  limit 
in  one  form  of  secured  credit  determines  the  natural  limit  in 


12  THK    NEW    PHILOSOPHY    OF    MONEY 

all  forms.     I   have  explained   what  is  secured    credit,  but  it 
will  be  well  to  formulate  a  precise  definition. 

12  Secured  credit  is  debt  incurred  with  ample  provision 
made  to  insure  payment  (79-91). 

13  Secured  credit,  then,  originates  in  the  voluntary  acts 
of  two  or  more  parties.  There  must  be  at  least  one  (there 
may  be  more)  who  incurs  the  debt,  and  one  or  more  to 
whom  the  debt  is  incurred.  The  other  essentials  are:  The 
material  upon  which  the  promise  is  recorded  (paper)  and 
the  security;  and  since,  as  we  have  seen,  there  is  practically 
no  limit  to  the  material  (paper),  the  natural  limit  to  secured 
credit  would  seem  to  be  determined  by  the  security,  because 
it  is  the  only  thing  that  can  limit  it.  What  difference,  then, 
does  it  make,  whether  it  is  a  secured  note,  paper  money,  or 
any  other  form?  It  is  the  security  that  determines  the  nat- 
ural limit  to  any  form  of  secured  credit.  Where  there  is  no 
security  there  can  be  no  secured  credit;  where  there  is  secur- 
ity, there  can  be. 

14  We  have  now  determined  the  natural  limit  to  the 
volume  of  money.  The  natural  limit  to  the  volume  of  coin 
money  is  the  quantity  of  the  metal  of  which  it  is  made. 
Vou  can  make  as  much  gold  coin  as  you  can  get  gold  bullion 
to  make  it  of.  You  cannot  make  any  more.  The  natural 
limit  to  the  volume  of  paper  money  is  security;  the  material 
of  which  it  is  made  being  unlimited,  you  can  make  as  much 
paper  money  as  you  have  security  to  convert  the  paper 
promises  to  pay  into  secured  credit,  so  that  no  one  will  run 
any  risk  in  taking  them  in  exchange  for  commodities. 

15  Remember,  this  is  the  7ia^u?'al  limit;  and  it  is  perti- 
nent to  inquire  now,  what  relation  it  bears  to  the  question: 
"how  much  is  enough?"  It  is  evident  that  there  can  be  no 
more;  but  why  should  there  be  any  less?  Our  definition  for 
secured  credit  is,  "debt  incurred  with  ample  provision  made 
to  insure  payment,"  and  we  have  defined  paper  money  to  be 
a  form  of  secured  credit.  It  is  not  denied  that  an  individual 
has  the  right  to  incur  debt,  but  he  must   not  incur  it  in   this 


INTKODUCTIOX  I3 

form  without  complyin<j  with  certain  restrictions.*  Here 
we  have  an  artiHcial  limit;  and  our  next  inquiry  must  be  to 
ascertain  what  is  the  object  of  this  artificial  limit. 

16  I  have  already  explained  that  the  term  "money"  is 
applied  to  that  instrument  which  is  in  general  use  for  the 
purpose  of  facilitating  the  exchange  of  products,  but  this  is 
not  sufficiently  definite.  Its  use  in  the  cancellation  of  indebt- 
edness and  in  payment  for  services,  while  it  should  not  l)e 
omitted,  is,  in  reality,  but  a  part  of  exchange.  It  should  be 
stated,  also,  that  the  use  of  money  obviates  the  necessity  for 
barter,  and  so  expedites  exchange,  which  would  otherwise 
be  hampered  and  even  impossible.  But  do  these  statements 
include  all  the  uses  that  money  is  put  to  and  all  the  purposes 
it  subserves.''  There  can  be  no  denying  that  to  a  money- 
lender, at  least  that  portion  of  his  money  which  he  lends, 
serves  him  a  purpose  not  included  in  those  I  have  named. 
He  does  not  use  it  himself  for  the  purpose  of  exchange,  but 
loans  it  to  another  who  needs  it  for  that  purpose.  The  pur- 
pose of  the  money-lender  is  to  derive  an  income  from  it. 
Here  our  field  of  inquiry  widens.  We  are  confronted  with 
conflicting  interests.  We  find  that  money  is  used  for 
another  and  quite  different  purpose  than  that  of  facilitating 
exchange;  and  that  the  interest  of  the  party  using  it  for  the 
one  purpose  is  hostile  to  the  interest  of  the  party  using  it  for 
the  other  purpose.  For  is  it  not  to  the  interest  of  the 
money-lender,  as  such,  that  there  be  a  scarcity  of  money  and 
that  the  rate  of  interest  be  high?  And  is  it  not  to  the 
interest  of  borrowers  that  there  be  plenty  of  money  and  that 
interest  be  low  ?  How  could  interest  be  low  with  a  scarcity 
of  money?  Or  how  could  interest  be  high  with  plenty  of 
money?  The  scarcer  money  is,  the  greater  the  opportunity 
of  the  possessor  to  lend  it;  and  the  greater  the  demand  for 
it,  the  higher  the  rate  of  interest. 


*The  restrictions  here  referred  to  are  those  which  interfere  with 
the  free  issue  of  paper  money,  such  as  the  10  per  cent  tax  imposed 
by  congress  and  the  requirements  in  the  different  States. 


14  THE    NEW    PHILOSOPHY    OF    MONEY 

17  To  be  sure  that  these  interests  are  distinct  and 
opposed  to  each  other,  let  us  pursue  our  investigation  still 
further. 

18  It  is  claimed  that  in  this  country  all  should  have  equal 
rights;  and  this  ought  to  be  especially  true  with  regard  to 
the  supply  of  the  medium  of  exchange.  The  means  of 
obtaining  it  that  are  open  to  one  should  be  open  to  all.  Let 
us  see  if  it  is  so. 

19  The  source  of  supply  of  money  in  this  country  is  the 
United  States  government.  It  will  coin  gold  for  all  on 
equal  terms,  or  give  gold  certificates  in  exchange  for  gold 
bullion.  But  this  is  the  only  commodity  it  will  now  coin 
into  money  or  upon  which  it  will  issue  certificates. 

20  Other  paper  money  may  be  obtained  by  organizing 
national  banks  and  depositing  United  States  bonds  in  the 
United  States  treasury;  but  you  must  organize  a  bank. 
Such  paper  money  cannot  be  procured  by  an  individual  bor- 
rower. 

21  Here  we  have  discrimination  in  favor  of  one  com- 
modity, and  in  favor  of  bankers  and  against  those  who  are 
not.  What  becomes  of  this  boast  about  equal  rights? 
Money  is  loaned  every  day  on  every  conceivable  kind  of 
securit}^,  from  a  piece  of  ordinary  kitchen  furniture  to  a 
private  mansion  or  a  block  of  buildings;  a  manufacturing 
plant,  or  an  entire  railroad;  but  all  such  money  must  go 
throuofh  the  hands  of  monev-lenders.  Not  one  of  these  bor- 
rowers  can  get  money  from  first  source. 

22  Now,  the  special  claim  that  The  New  Philosophy 
of  Money  makes  is,  that  paper  money  being  secured  credit, 
whoever  can  furnish  the  security  is  entitled  to  that  form  of 
credit;  that  equality  of  rights  demands  it,  and  that  to  deny  it 
is  to  deny  the  right  of  private  property. 

23  But  this  is  not  all.  It  unqualifiedly  affirms  that  it  is 
of  the  very  greatest  importance;  that  it  is  to  the  very  best 
interest  of  all  concerned,  including  the  money-lenders  them- 


INTRODUCTION  1 5 

selves,  that  this  right  be  recognized  at   once,  and    that  the 
phui  that  will  make  its  realization  possible  be  adopted. 

24  But,  before  we  proceed  further  into  this  labyrinth  of 
inconsistencies  and  incoherencies  called  political  economy,  let 
us  clear  up  as  we  go,  and  make  sure  our  own  position. 

25  The  questions  still  pending,  of  those  brought  to  the 
notice  of  the  reader,  are:  "What  is  the  object  of  this  artifi. 
cial  limit  to  paper  money?"  and,  still  farther  back,  is  that  all- 
important  one,  "how  much  is  enough?" 

26  I  have  pointed  out  that  the  means  employed  to  bring 
about  this  artificial  limit  are  legislative  enactments  by  con- 
gress and  State  legislatures,  that  restrict  the  issue  of  paper 
money  and  furnish  it  to  bankers  only. 

27  I  have  shown,  also,  that  the  rate  of  interest,  like  the 
price  of  commodities,  is  affected  by  supply  and  demand;  that 
a  scarcity  of  money  makes  interest  high,  just  as  a  scarcity  of 
any  article  that  there  is  a  demand  for  will  cause  the  ^Drice  of 
that  article  to  be  high. 

28  It  follows,  therefore,  that  the  only  object  of  limiting 
paper  money  to  less  than  the  natural  limit,  is  to  keep  up  the 
rate  of  interest;  and  it  follows  also,  that  since  it  benefits 
money-lenders  only  (68),  it  must  be  their  work.  Borrowers 
would  hardly  spend  their  time  in  efforts  to  secure  the  pas- 
sage of  laws  in  opposition  to  their  own  interests. 

29  We  will  now  devote  our  attention  to  the  other  ques- 
tion that  remains  unanswered.  The  reader  should  bear  in 
mind  what  has  been  said  about  the  source  of  the  supply  of 
money,  and  how  the  borrower  is  cut  off  from  that  source  and 
is  compelled  to  patronize  the  money-lender;  and  also  that  we 
have  defined  paper  money  to  be  a  form  of  credit. 

30  Now,  if  a  borrower  borrows  paper  money  of  a 
money-lender,  he  obtains  credit  (9).  Whose  credit  is  it  that 
he  obtains?  It  must  be  the  credit  of  the  money-lender.  It 
certainly  cannot  be  his  own  credit.  To  be  his  own  credit, 
the  money  would  have  to  be  issued  to  him  direct  on  his  own 
security,  just  as  gold  certificates  are  issued  on  gold.      What 


l6  THE    NEW    PHILOSOPHY    OF    MONEY 

he  has  borrowed  must  be  either  gold  certificates,  silver  certi- 
ficates, treasury  notes  or  national  bank  notes.  They  are  not 
his  credit.  They  were  issued  by  the  government,  not  to 
him,  but  to  a  money-lender,  and  he  borrowed  them  of  the 
same  or  some  other  money-lender.  But  why  should  he  use 
the  money-lender's  credit.''  We  must  regard  his  security  as 
good.  The  money-lender  would  not  lend  his  money  on  it  if 
it  were  not.  If  it  is  good  enough  to  insure  the  return  of 
paper  money  that  is  redeemable  in  gold,  it  must  be  equiva- 
lent to  gold ;  if  it  is  good  enough  to  secure  such  money  it 
must  be  as  good  as  gold.  If  it  is  as  good  as  gold,  why  not 
issue  certificates  on  it  just  as  well  as  on  gold?  Again  I  ask: 
Why  should  he  use  the  money-lender's  credit  when  his 
security  is  as  good  as  gold?  Is  he  not  deprived  of  his  right 
to  the  use  of  his  property  for  purposes  of  credit?  If  he  can- 
not use  his  property  in  this  way  without  the  consent  of  the 
money-lender,  then  he  is  not  the  absolute  owner  of  that 
property.  Is  it  not  a  denial  of  the  right  of  private  prop- 
erty? 

31  Suppose  a  farmer,  who  owns  a  farm  which  is  unen- 
cumbered with  debt,  rents  his  farm  and  moves  with  his  fam- 
ily into  town.  He  has,  besides  his  farm,  considerable  grain 
in  warehouse.  He  needs  some  household  furniture,  and 
proceeds  to  investigate  as  to  its  cost.  The  furniture  dealer 
foots  up  the  cost  and  it  amounts  to  $500.  The  farmer  asks 
him  how  much  he  will  discount  it  if  he  pays  him  C.  O.  D. 
The  dealer  informs  him  that  he  will  deduct  6  per  cent  if  he 
pays  cash  down  on  receipt  of  goods.  The  farmer  has  no 
money,  but  he  has  good  security.  He  has  $2,000  worth  of 
grain,  and  he  proceeds  to  inquire  what  it  will  cost  him 
to  bo-rrow  the  $500.  He  learns  that  a  money-lender  will 
accommodate  him  at  the  rate  of  6  per  cent  interest,  holding 
all  his  grain  as  security.  Surely  no  one  will  claim  that  this 
is  not  a  fair  illustration  of  present  methods. 

33  It  makes  no  difference  whether  the  $500  are  bor- 
rowed or  whether  the  g-oods  are  boug-ht  on  the  usual  two  or 


INTRODUCTION 


17 


':hree  months  time.  In  either  case,  there  is  6  per  cent  inter- 
est to  be  paid  in  excess  of  the  cash  price.  It  is  interest  on 
the  money  borrowed,  or  it  is  interest  on  the  deferred  payment 
for  the  goods. 

33  It  is  a  correct  business  rule  that  where  you  pay  out 
money,  it  must  be  for  vakie  received;  but  what  does  this 
fanner  get  in  exchange  for  this  $30?  He  is  wilHng  to  relieve 
the  furniture  dealer  of  all  risk,  by  paying  him  cash  on  receipt 
of  goods,  but  it  does  not  save  him  from  the  loss  of  this  $30. 
The  individual  who  enables  him  to  pay  cash,  and  who 
charges  him  the  $30  (who,  by  the  way,  is  quite  moderate; 
there  are  usually  additional  charges,  commission,  etc.,  which 
bring  up  interest  to  about  8  or  10  per  cent),  furnishes  him 
with  what?  Some  printed  pieces  of  paper,  the  actual  cost  of 
which  does  not  exceed  one- half  of  one  per  cent.  He  as- 
sumes no  risk,  for  the  security  is  ample  (95).  The  charge, 
therefore,  covers  notliing  but  the  printed  pieces  of  paper;  for 
that  is  all  the  farmer  gets. 

34  Now  let  us  come  back  to  the  question  as  we  left  it 
before  we  introduced  the  illustration.  The  proposition  was 
advanced  that  whatever  collateral  is  good  enough  to  secure 
paper  money  that  is  redeemable  in  gold,  must  necessarily  be 
as  good  as  the  gold  it  is  redeemable  in;  and  the  question  was 
put:  "If  it  is  as  good  as  gold,  why  not  issue  certificates  on 
it  just  as  well  as  on  gold?"  There  is  no  reason  why  this 
should  not  be  done.  It  would  be  opening  to  all  the  means 
of  obtaining  credit  in  the  form  of  paper  money,  that  are  now 
open  only  to  a  few  (iS,  19,  20,  21).  It  would  be  the  con- 
ceding of  a  right  that  is  now  denied — the  right  to  that  credit 
without  the  intervention  of  money-lenders — the  right  which 
The  New  Philosophy  of  Aloney  teaches  inheres  in  the  right 
of  private  property;  and  that  the  individual  has  as  much 
right  to  that  form  of  credit  called  paper  money  as  he  has  to 
make  a  mortgage  note.  Ilis  right  to  make  a  promissory  note 
and  secure  it  by  mortgage  is  not  questioned.       His  right  to 


iS  THE    NEW    PHILOSOPHY    OF    MONEY 

credit  in  the  form  of  paper  money  cannot  be  successfully  dis- 
puted.    It  would  be  assailing  the  right  of  property. 

35  We  have  now  the  solution  to  the  question,  "how 
much  is  enough?"  It  is  easy.  The  reader  must  already 
have  foreseen  it.  When  the  artificial  limit  has  been  removed 
and  all  who  have  security  can  obtain  the  representative 
paper  money  credit  he  is  entitled  to,  and  from  its  source — 
direct  from  the  printing  press — instead  of  from  the  money- 
lender, the  demand  will  be  supplied;  and  when  that  is  sup- 
plied, there  is  enough;  but  so  long  as  that  is  not  supplied, 
how  can  there  be  enouijh? 


THE  GENERAL  EFFECT  OF  THE  ARTIFICIAL 
LIMIT  TO  THE  VOLUME  OF  MONEY, 

36  Let  us  consider  for  a  moment  what  would  be  the 
result  if  a  system  of  money  such  as  is  proposed  in  The  New 
Philosophy  of  Money,  were  in  actual  operation  (129),* 
Would  not  all  who  could  furnish  security  take  advantage  of 
the  low  rate  of  interest,  and  borrow  all  they  could?  Espec- 
ially as  the  certainty  that  the  rate  would  not  be  higher  in  the 
future,  and  become  a  cormorant  and  swallow  them  uj)  at  no 
distant  day,  as  it  does  now,  would  be  too  apparent  to  leave 
any  doubt. 

37  And  what  would  be  the  consequence  resulting  from 
the  people  borrowing  so  much  money?  When  an  individual 
borrows  money  it  is  with  the  object  of  going  into  some  new 
enterprise,  extending  one  already  established,  or  paying  off 
some  debt.  In  cither  case,  he  is  adding  to  the  general 
increase  of  trade.  What  is  true  in  one  instance  must  be  true 
in  all;  therefore,  the  greater  the  amount  of  money  borrowed, 
the  greater  the  increase  in  trade.f 

38  Now,  if  this  is  the  general  effect  that  results  when 
there  is  ;?c  artificial  limit  (15),  the  exact  opposite  must  be 
the  result  when  there  is  an  artificial  limit.  The  general 
effect,  therefore,  of  the  artificial  limit  to  the  volume  of 
money  is  paralysis  and  stagnation  to  trade;  and  the  more 
restriction,  the  more  stagnation. 


*See  Appendix  for  plan. 

fThe  reader  must  bear  in  mind  that  under  the  system  herein  pro- 
posed, all  money  borrowed  will  be  new  monev,  and  therefore  an  addi- 
tion to  tlie  volume  in  circulation  ;  whereas,  under  the  existing  system, 
the  borrowinij  of  money  adds  notliing  to  the  volume;  being  merely 
tiie  transfer  of  that  much  from  one  party  to  another. 


20  THE    NEW    PHILOSOPHY    OF    MONEY 

39  Just  as  a  man  without  tools  is  helpless  and  remains 
idle,  so  production  and  exchange  must  stop  when  the  tool, 
money,  is  absent.  And  in  proportion  to  its  abundance,  and 
the  ease  with  which  it  can  be  obtained,  will  be  the  activity 
or  inactivity  of  trade;  just  as  a  scarcity  or  plentiful  supply  of 
tools  will  retard  or  accelerate  the  work  of  the  mechanic. 

40  Who  can  tell  the  marvelous  development  we  might 
have  attained,  if  there  had  never  oeen  an  artificial  limit  to 
the  volume  of  money?  So  far,  a  medium  of  exchange  pure 
and  simple,  has  never  been  provided.  The  money  power, 
or  the  combined  interests  of  money-lenders,  has  ever  suc- 
ceeded in  inducing  the  people  to  use  the  makeshift  that  suits 
its  purpose.  The  medium  that  will  best  perform  the  func- 
tion of  exchange,  must,  of  necessity,  be  provided  by  the 
borrowers  themselves;  for  their  interest  being  the  direct 
opposite  of  that  of  the  money-lenders  (16),  as  such,  it  is  not 
natural  to  expect  that  the  latter  will  initiate  a  movement  in 
opposition  to  what  they  regard  as  their  interest.  The  ques- 
tion may  well  arise  in  the  mind  of  the  reader,  especially  if  he 
(or  she)  be  somewhat  of  a  thinker, — "is  this  a  natural  state 
of  society?  Are  those  normal  institutions  which  engender 
antagonisms,  and  tend  to  form  classes  with  opposing  inter- 
ests?" Since  the  aim  and  end  of  life  is  common  to  all — the 
attainment  of  happiness — and  since  whatever  facilitates  and 
simplifies  production  and  exchange  tends  to  reduce  burdens, 
and,  therefore,  to  the  attainment  of  happiness,  the  real  inter- 
est of  all  is  identical.  Progress  involves  change;  therefore, 
our  institutions  must  change  or  they  are  not  progressive. 
As  all  are  interested  in  progress  because  all  are  interested  in 
happiness,  and  as  we  cannot  attain  happiness  unless  we 
change — progress  from  our  present  unhappy  condition — the 
real  interest  of  one  class  is  not  opposed  to  that  of  any  other; 
and  if  there  is  apparent  conflict  of  interest,  it  is  because  some 
institutions  which  have  outlived  their  usefulness,  or  have  not 
yielded  to  the  iconoclastic  hand  of  evolution,  still  stand  as 
barriers  to  progress  and  block  the  road   to  happiness.       It  is. 


GENERAL    EFFECT    OF    THE    AUTIFICIAI.    LIMIT  21 

their  interest  as  money-lenders  that  prompts  them  to  encour- 
age and  perpetuate  an  institution  which  hmits  the  supply  of 
money  and  keeps  up  a  high  rate  of  interest;  while  it  is  to 
their  interest  as  members  of  a  common  humanity,  that  that 
institution  should  give  place  to  a  more  progressive  and  useful 
one.  Which,  then,  of  these  two  interests  is  paramount — the 
attainment  of  happiness  on  the  part  of  a  class,  or  the  attain- 
ment of  happiness  on  the  part  of  mankind  as  a  whole? 

41  There  can  be  no  such  thing  as  the  attainment  of  hap- 
piness on  the  part  of  a  class,  as  distinct  from  the  whole,  un- 
less it  be  at  the  sacrifice  of  the  rest;  and  the  question  here 
arises:  Could  such  a  condition  be  considered  a  state  of  hap- 
piness? Can  an  individual  be  happy  surrounded  by  people 
living  in  poverty,  with  the  necessary  accompanying  evils, 
such  as  disease  and  crime;  his  health  and  that  of  his  family 
and  friends  in  danger  from  unhygienic  conditions  breeding 
contagious  diseases,  to  say  nothing  of  the  insecurity  from 
invasion  of  person  and  property?  Can  such  an  individual 
be  happy?  If  he  congratulates  himself  upon  his  happiness, 
it  is  because  he  is  ignorant  of  another  kind  of  a  vastly  super- 
ior quality,  and  it  is  because  he  does  not  realize  what  are  his 
true  interests,  that  his  constant  aim  is  to  get  rid  of  the 
burdens  of  life  by  shifting  them  onto  others.  Having  suc- 
ceeded, he  is  happy;  but  he  has  only  postponed  the  evil.  A 
day  of  reckoning  must  come.  These  others  also  desire  to 
get  rid  of  the  burdens.  They  are  of  the  same  flesh  and 
blood;  and  the  greater  the  burdens,  the  greater  the  danger; 
both  from  the  unli)'gienic  conditions  and  from  discontent. 
His  real  interests  consist,  not  in  shifting  the  burdens,  thus 
increasing  those  that  others  have  to  bear,  but  in  the  discovery 
of  the  means  of  getting  rid  of  them  altogether.  If  this  is 
true,  how  is  it  that  he  does  not  act  with  that  end  in  view? 

42  The  fact  is  that  society  as  it  is  today  is  the  outgrowth 
of  ignorance.  Its  institutions  arc  such  as  class  interests  have 
reared  for  their  own  benefit.  The  real  interests  of  mankind 
have  been  lost  sight  of.      We  have  an  arbitrary  money  sys- 


22  THE    NEW    PHILOSOPHY    OF    ^lONEY 

tern  which  limits  credit,  and  makes  it  possible  for  a  few  to 
control  it.  This  control  is  a  power  that  few  comprehend. 
The  scarcity  of  money  in  consequence  of  the  artificial  limit, 
makes  high  rates  of  interest.  As  all  surplus  funds  are 
invested  from  year  to  year — the  interest  on  investments  one 
year  is  reinvested  the  next — and  as  all  capital  successfully 
engaged  in  business  receives  interest,  which  is  again  rein- 
vested, it  is  not  difficult  to  see  that  a  very  large  amount  is 
compounded  every  year,  the  marvelous  rapidity  of  increase 
of  which  (130)  accounts  for  our  millionaires,  and,  necessar- 
ily, also,  for  our  paupers.  It  is  evident,  therefore,  that  the 
artificial  limit  and  an  arbitrary  money  system  were  not 
devised  for  the  benefit  of  mankind,  but  in  the  interest  of  a 
few.  These  millionaires  and  the  pauperization  of  the  masses 
would  never  have  occurred  if  there  had  been  no  artificial 
limit  to  the  volume  of  money.  There  would  be  no  arbitrary 
money  system  and  therefore  no  limit  to  credit,  except  the 
natural  one,  if  there  had  been  no  artificial  limit  to  the  volume 
of  money.  Usury,  or  interest,  will  come  to  an  end  when  the 
artificial  limit  to  the  volume  of  money  shall  cease  to  exist. 
The  possibility  of  getting  a  living  without  labor,  and,  there- 
fore at  the  expense  of  others,  is  the  most  vitiating  factor  in 
our  civilization;  for,  as  long  as  it  is  possible,  however  remote 
the  probability,  however  few  the  number  who  attain  the 
coveted  goal,  it  will  be  the  one  thing  that  will  absorb  atten- 
tion; the  one  aim  of  life  to  which  all  energies  will  be  bent; 
and  of  course,  those  questions  which  are  of  interest  to  man- 
kind at  large  are  subordinated  to  this  all-consuming  strug- 
gle, this  all-absorbing  theme;  the  accumulation  of  wealth  m 
order  to  live  on  the  interest  it  brings.  Take  away  the  arti- 
ficial limit  to  the  volume  of  money,  and  the  institutions 
that  this  class  have  reared  in  their  interest  will  be  left  with- 
out a  foundation — the  civilization  that  is  based  upon  usury 
will  come  to  an  end. 

43     It  is  vitiating,  because,  as  Proudhon  says,  "property 


GENERAL    EFFECT    OF    THE    AKTIFICIAI.    EIMIT  23 

is  robbery."*  It  cannot  exist  on  its  just  basis,  which  is 
hibor;  therefore,  in  its  true  sense,  "property  is  impossible" 
(123),  for  usury  not  only  absorbs  all  property,  but  there  is 
ever  a  balance  which  can  never  be  paid,  as  Mr.  J.  W. 
Bennett  has  so  clearly  shown  in  his  powerful  article,  "The 
Cause  of  Financial  Panics,"  in  the  March  "Arena,"  1S94 
(i  18-126). 

44  The  class  that  would  perpetuate  our  money  system, 
once  called  "specie  basis,"  but  which  is  being  narrowed 
down  to  a  "gold  basis,"  by  the  exclusion  of  silver;  the  class 
that  has  rearedour  institutions, — the  State,  with  its  manifold 
devices  for  plunder — its  army  and  its  navy  to  enforce  them, 
its  armories,  its  bastiles  and  its  gatling  guns  to  strike  terrcr 
into  the  minds  of  its  opponents,  and  its  courts  to  solemnize 
its  acts  and  justify  its  course;  the  class  that  elect  themselves 
to  office  to  legislate  and  to  preside;  what  does  this  class 
know  about  the  real  interests  of  mankind?  They  not  only 
do  not  study  the  subject,  but  they  override  with  their  money 
and  their  vulgarity,  any  who,  being  especially  adapted, 
should  dare  to  show  up  the  evils  which  result  from  the 
course  they  are  pursuing. 

45  The  rest  of  the  people  are  too  busy  struggling  under 
the  burdens  this  class  has  shifted  onto  them,  to  be  able  to 
give  special  attention  to  the  grave  questions  that  affect  man- 
kind as  a  whole;  thus,  as  already  stated,  the  real  interests  of 
mankind  have  been  lost  sight  of;  and  each  individual,  bent 
on  the  insane  effort  to  accomplish  the  impossible,  is  only 
adding  to  the  momentum  which  must  finally  rupture  the 
bubble  we  call  civilization.  Such  is  the  general  effect  of  the 
artificial  limit  to  the  volume  of  money! 


♦  •'What  is  Property?"  by  P.J.  Proudhon. 


EXCHANGE. 

46  As  elsewhere  stated  in  this  book,  exchange  is  as 
necessary  as  production;  for  no  one  produces  everything  he 
needs,  and  is  therefore  dependent  on  others,  with  whom  he 
must  exchange  his  services,  or  part  or  all  of  his  products,  for 
such  things  as  he  needs  and  does  not  produce.  Now,  for 
obvious  reasons,  we  cannot  exchange  our  services  or  our  sur- 
plus products  direct  with  those  who  have  for  exchange  such 
things  as  we  need.  Except  in  rare  instances  they  do  not  want 
what  we  have  to  exchange,  and  when  we  find  one  who  does, 
it  is  almost  invariably  the  case  that  he  has  not  the  articles  we 
need.  It  follows,  therefore,  that  we  have  to  exchange  indi- 
rectly instead  of  directly,  and  hence  the  necessity  for  a  med- 
ium of  exchange — a  universal  order  for  goods — that,  deliver- 
ing your  product  or  services,  you  get  an  order  for  an  equal 
amount  of  products,  good  anywhere  where  they  are  offered 
for  sale.  Such  is  a  medium  of  exchange  called  money  (4, 
10) ;  and  it  is  those  who  incur  the  risk  when  they  part  with 
their  services  or  property  who  should  decide  on  what  condi- 
tions it  shall  be  furnished;  because,  as  elsewhere  explained, 
it  is  a  worthless  thing  in  itself  (301),  of  no  market  value, 
and  only  possessing  a  purchasing  power  equal  to  its  face 
value  when  honestly  issued.  And  the  inore  one  examines 
into  the  merits  of  the  case,  the  more  he  is  convinced  that  this 
view  is  the  correct  one;  but  instead  of  this  being  the  case, 
we  find  that  it  is  a  class  that  has  little  or  no  direct  interest  in 
exchange  of  products,  that  decides  not  only  on  what  condi- 
tions it  shall  be  furnished,  but  they  also  determine  how  much 
shall  be  furnished,  and  do  all  in  their  power  to  prevent  those 
interested  from  supplying  themselves.  Think  of  a  class  of 
individuals  who  have  no  direct  interest  in  transportation,  hav- 


EXCHANGE  25 

ing  the  exclusive  control  over  the  supply  of  locomotives,  and 
deciding  that  so  many  per  100,000  of  the  population  is  amply 
sufficient  to  do  the  hauling.  "^Vhat  nonsense!"  the  reader 
will  exclaim.  But  is  it  not  equally  as  ahsurd  to  allow  a  class 
to  control  the  means  of  exchange  as  it  would  be  to  allow  a 
set  of  men  to  control  the  means  of  transportation?  The 
power  over  the  destinies  of  men  is  more  effectual  through 
the  control  of  money  than  of  anything  else,  and  that  is  pre- 
cisely why  the  ruling  class  use  this  means.  This  control 
must  be  brought  to  an  end;  for  there  is  not  the  slightest 
excuse  for  it,  and  there  is  every  reason  why  those  engaged 
in  production  and  exchange  should  assume  it  themselves. 

47  To  make  this  matter  still  clearer  it  is  not  necessary  to 
present  proof,  for  all  who  have  had  any  experience  in  busi- 
ness know,  to  their  sorrow,  that  among  the  number  who 
obtain  goods  on  credit,  there  are  some  who  fail  to  pay.  In 
this  kind  of  credit  (unsecured  credit)(9),  then,  there  is  a  cer- 
tain loss  from  bad  debts.  There  is  also  the  inconvenience  of 
having  to  part  with  the  goods  without  receiving  the  money 
for  them  imtil  some  time  in  the  future.  Now,  the  Mutual 
Credit  System  proposes  to  put  an  end  to  these  two  evils  by 
doing  away  entirely  with  unsecured  credit,  substituting  se- 
cured credit  (paper  money)(i2).  Instead  of  an  individual 
obtaining  credit  in  products  of  those  who  sell,  he  obtains 
certificates  of  credit  of  the  Mutual  Credit  Association,  for 
which  he  furnishes  ample  security;  thus  only  those  who 
have  security  can  obtain  credit  in  the  form  of  certificates  of 
credit  (60).  That  puts  an  end  to  bad  debts — one  of  the  two 
evils  just  mentioned. 

48  By  the  use  of  these  certificates,  which  constitute  the 
best  money  that  can  be  devised,  all  business  transactions  can 
be  conducted  on  a  cash  basis;  thus  putting  an  end  to  the 
other  evil — the  inconvenience  resulting  from  the  delay  in 
collecting  for  the  goods  sold.  Independent  of  other  benefits 
that  would  follow,  we  have,  then,  in  the  Mutual  Credit 
System,  the  nieins  of  inaugurating  universal  cash  joayments; 


26  THE    NEW    PHILOSOPHY    OF    MONEY 

the  cash  —  certificates  of  credit  —  being  amply  secured. 
What  better  argument  can  be  presented  in  favor  of  the  new 
system  than  the  proposition  to  gradually  convert  all  book 
accounts  into  ready  cash? 

49  In  granting  credit  as  it  is  now  done,  business  men 
rely  mainly  on  the  reports  of  firms  who  make  a  specialty  of 
inquiring  into  the  business  standing  of  individuals;  so  that 
whether  or  not  one  can  obtain  the  credit  he  asks,  depends 
very  largely  upon  these  reports.  If  he  is  given  the  credit,  it 
means  that  he  obtains  goods  without  paying  for  them  imme- 
diately, and  that  those  who  give  the  credit  are  minus  the 
amount  of  the  credit  until  the  goods  are  paid  for.  Under 
this  absurd  system,  it  is  not  the  party  who  gets  the  benefit  of 
the  credit,  but  the  party  who  confers  the  benefit  who  takes 
all  the  risk.  The  New  Philosophy  of  Money  teaches  that 
the  party  who  desires  credit,  instead  of  asking  others  to  take 
the  risk  involved  in  giving  him  credit,  he  should  assume  that 
risk  himself,  and  proposes  the  Mutual  Credit  System  as  the 
means  of  attaining  that  end. 

50  It  so  happens  that  it  is  inherent  in  the  very  nature  of 
economics,  that  that  which  is  the  most  advantageous  to  the 
community  as  a  whole,  at  the  same  time  invariably  presents 
an  irresistable  attraction.  Man  is  still  moved  by  his  cupidity. 
It  is  to  this  propensity,  mainly,  that  we  are  indebted  for  the 
advantages  we  now  enjoy,  and  it  is  upon  it  that  we  must 
depend  for  those  that  are  yet  to  come.  The  Mutual  Credit 
System  of  money  is  not  lacking  in  its  irresistable  attraction 
— its  vital  force,  that  which  will  outweigh  all  obstacles  and 
defeat  all  opposition — its  appeal  to  man's  cupidity.  The 
borrower,  like  the  purchaser,  is  interested  in  himself.  He 
will  not  long  pay  high  rates  of  interest  when  he  knows  how 
to  supply  himself  at  low  rates;  just  the  same  as  a  purchaser 
will  not  pay  one  merchant  a  higher  price  for  goods  than  he 
can  buy  them  for  elsewhere. 

51  We  have  seen,  then,  that  the  reasons  why  business 
men  and  not  money-lenders  should  provide  the  medium  of 


EXCHANGE  27 

exchange,  and  have  entire  control  of  it,  are  overwhehning; 
and  we  have  seen  that  the  inducement  is  altogether  too  great 
for  this  class  to  resist  the  temptation.  When  they  take  a 
hand  in  investigating  and  realize  that  they  can  save  from  5 
to  10  per  cent  on  the  money  they  borrow,  it  can  be  safely 
stated  that  they  will  do  it. 


NOT  ENOUGH  MONEY. 

52  We  apply  the  term  "scarce"  to  things  that  are  nat- 
ural products  or  those  produced  by  nature,  and  also  to 
artificial  products  or  such  things  as  are  produced  by  labor  or 
devised  by  the  ingenuity  of  man;  but  we  do  not  reason  the 
same  with  reference  to  the  scarcity  of  the  one  as  of  the 
other.  When  we  say  that  diamonds  are  scarce,  we  state  a 
fact  about  which  there  is  no  use  in  reasoning  any  further, 
as  we  could  not  possibly  increase  the  quantity.  Not 
so  with  regard  to  the  artificial  products.  If  there  is  a 
scarcity  relative  to  the  demand  for  any  of  these  artificial 
products,  ingenuity  at  once  sets  to  work  to  devise  means  of 
increasing  the  supply.  This  is  true  of  every  artificial  thing 
except  money,  although  money  is  essentially  artificial.  Why 
this  exception.''  We  hear  it  stated,  and  we  know  from 
experience  that  It  is  true,  that  money  is  scarce.  If  it  were 
any  other  article  than  money  there  would  be  no  end  to  the 
efforts  made  to  increase  the  supply.  If  money  is  of  artificial 
origin,  why  can  we  not  increase  its  supply  just  as  we  do  any 
other  artificial  thing?  Naturally,  or  in  reality,  money  is  not 
an  exception;  and  the  effect  of  supply  and  demand  would  be 
as  effectual  in  regulating  the  quality  and  quantity  of  money 
as  it  has  been  in  producing  sound  and  cheap  insurance,  ease 
and  comfort  in  travel,  the  printing  press,  or  any  and  all  the 
advantages  of  applied  science  and  art.  If  by  a  certain  pro- 
cedure a  printed  bill  can  be  converted  into  a  "dollar,"  made 
to  circulate  as  money,  cancel  indebtedness  and  be  acceptable 
in  exchange  for  commodities,  why  cannot  this  method  be 
extended  until  we  satisfy  all  demands  for  money,  and  make  it 
possible  to  do  all  business  on  a  cash  basis,  instead  of  the 
enforced  unsecured  credit  system  of  today?      Why  must  a 


NOT    EXOL'GII     MONEY 


39 


♦'civilized"  community  be  startled  every  few  weeks  by  a 
gigantic,  unexpected  and  unnecessary  failure,  and  every 
day  by  numerous  smaller  ones?  "Why  must  the  individual's 
business  success  be  a  game  of  chance  in  which  he  may  slave 
during  the  vigorous  part  of  his  life  and  be  left  penniless  in 
his  old  age?  Why  is  our  system  of  credit  so  destitute  of 
scientific  method?  It  is  pure  guesswork,  and  is  doubly 
damnable  in  that  it  offers  a  premium  to  rascality  and  defeats 
honesty.  Is  not  the  question  of  granting  credit,  either  at  a 
bank,  financially,  or  by  a  merchant,  commercially,  a  matter 
of  guesswork?  How  can  one  know  that  the  individual 
seeking  credit  will  be  able  to  meet  his  obligations? 

53  In  financial  circles,  where  there  is  less  competition 
and  monopoly  is  more  concentrated,  an  endorser  is  demanded; 
but  who  is  the  endorser?  He  may  be  a  friend  of  the  bor- 
rower who  knows  little  of  hov/  his  balance  sheet  would  fig- 
ure, but  considers  him  an  honest  man,  and  yet  he  may  be 
deceived.  He  may  be  a  patron  of  the  bank  whom  it  consid- 
ers good,  and  who,  on  account  of  his  extensive  transactions 
and  his  prominence  in  society,  it  is  reluctant  to  refuse.  Here 
we  have  favoritism  and  uncertainty.  Or,  again,  both 
endorser  and  endorsee  may  be  engaged  in  "kiting"  to  save 
themselves  from  the  effects  of  previous  schemes  of  which 
they  had,  perhaps,  been  victims.  The  scarcity  of  money 
and  the  consequent  monopoly  of  credit  produce  these  results, 
and  induce  otherwise  honest  and  fair-minded  citizens  to  resort 
to  deceit  and  false  pretense  to  "bridge  over"  and  save  them- 
selves and  dependent  ones  from  poverty,  which  the  system 
and  not  themselves  individually,  is  responsible  for.  "What 
should  we  think  of  a  system  that  offers  greater  inducements 
to  play  false  than  to  be  truthful  and  honest? 

54  If  the  present  system  is  so  defective,  so  inconsistent 
with  the  spirit  of  progress  and  so  conducive  to  immorality 
and  injustice  in  its  effects,  are  these  not  sufficient  reasons 
why  we  should  investigate  any  new  system  which  claims  it 
will  afford  relief? 


30  THE    NEW    PHILOSOPHY    OF    MONEY 

55  The  supply  of  a  sufficient  volume  of  perfectly  reliable 
medium  of  exchange  to  enable  all  commercial  transactions  to 
be  cash — secured  credit  instead  of  unsecured  credit — is  not 
only  essential  to  prosperity,  justice  and  morality,  but  is  as 
simple  and  easy  of  accomplishment  as  to  establish  and  con- 
duct building  and  loan  associations  or  insurance  companies. 
It  is,  in  fact,  so  irrational  to  have  a  scarcity  of  money,  that  it 
will  be  hard  to  make  the  next  generation  believe  such  vv^as 
the  case  (77). 

56  If  it  is  not  scarcity  of  money  (secured  credit)  that 
compels  a  resort  to  book  or  time  credits  (unsecured  credit), 
what  is  it  that  does?  If  accounts  are  finally  to  be  settled 
by  the  payment  of  money — the  transfer  of  secured  credit 
— why  defer  it  thirty,  sixty,  ninety  days,  or  six  months? 
If  there  is  not  enough  money  to  cancel  indebtedness,  how 
can  postponement  of  settlement  make  it  any  more  possible 
of  accomplishment?  If  a  dollar  will  not  pay  a  debt  of  two 
dollars,  much  less  ten  or  twenty,  now,  will  it  in  thirty,  sixty, 
ninety  days,  or  six  months,  or  ever?  (75-77). 

57  Debt  in  the  form  of  unsecured  credit,  book  accounts, 
promises  to  pay,  etc.,  is  not  transferable  in  exchange  for 
commodities  as  secured  credit  in  the  form  of  paper  money  is. 
Why,  then,  do  we  go  on  contracting  obligations  in  the  form 
we  know  to  a  certainty  we  cannot  meet,  when  we  could  just  as 
well  contract  them  in  a  form  we  know  with  equal  certainty 
we  could  meet?  It  is  true  that  not  all  unsecured  credits 
could  be  converted  into  secured  credits;  not  all  who  have  an 
account  current  with  one  or  more  merchants  could  put  up 
security  to  borrow  certificates  of  credit  of  the  Mutual  Credit 
Association;  but  it  is  equally  true  that  if  those  who  could 
put  up  security  were  offered  the  opportunity  to  do  so,  and 
get  certificates  of  credit  at  i  per  cent  per  annum,  with  which 
they  could  buy  at  cash  prices,  there  M'ould  soon  be  enough 
in  circulation  to  enable  all  transactions  to  be  conducted  on  a 
cash  basis.*     It  is  not  necessary  that  everybody  should  bor- 

*See  foot  note,  page  19. 


NOT    KNOUGH     MONEY 


31 


row  money  in  order  that  there  be  plenty  in  circulation. 
Those  who  have  wealth  will  always  use  it  to  the  best 
advantage  to  themselves  that  they  know  of.  If,  under  a 
correct  system  of  money,  interest  is  abolished,  and,  as  a  nec- 
essary result,  dividends  also,  as  they  are  but  a  form  of  inter- 
est, capitalists  will  still  be  anxious  to  employ  their  wealth,  if 
only  for  the  purpose  of  preserving  it;  as  wealth  not  in  use 
decays  more  rapidly  than  when  in  use,  and  the  enterprise 
that  uses  tl:e  wealth  as  capital  will  naturally  have  to  sustain 
the  loss  from  wear  and  tear  and  decay.  The  capitalist  will 
therefore  seek  every  opportunity  for  investment,  availing 
himself  of  the  advantage  which  the  Mutual  Credit  Associa- 
tion affords  of  credit  in  that  most  desirable  form — paper 
money.* 

5S  Thus  it  can  be  readily  seen  that  the  incentive  to  bor- 
row money  when  the  rate  is  only  i  per  cent  per  annum,  or 
less,  in  order  to  get  the  benefit  of  cash  prices,  will  be  very 
great,  and  all  will  avail  themselves  of  the  opportunity  vv^ho 
can.  Hence  there  will  always  be  all  the  money  in  circula- 
tion necessary  to  do  an  entirely  cash  business. 


*Credit,  the  great  lever  in  human  progress,  will  then  be  worked 
at  long  range  and  "for  all  it  is  worth."  It  will  not  work  disastrously 
as  it  does  now,  because  it  will  be  secured  instead  of  unsecured  credit. 
It  will  be  live  credit,  in  the  available  form  of  a  medium  of  exchange, 
instead  of  dead  credit  in  the  unavailable  form  of  book  accounts. 


"TOO  MUCH  MONEY." 

59  Where  the  system  of  money  is  such  that  the  supply  is 
furnished  direct  from  the  printing  press  to  borrowers  who 
can  put  up  security,  as  The  New  Philosophy  of  Money 
teaches  is  the  proper  way,  there  cannot  be  too  much  or  too 
little  money  (35). 

60  It  is  for  the  individual  who  can  put  up  security  to 
decide  whether  he  needs  money  or  not — no  one  else  can 
decide  it  for  him — and  it  is  the  business  of  the  institutions 
that  supply  it,  to  furnish  him,  on  application,  the  sum  he  is 
entitled  to  in  proportion  to  the  security  he  is  prepared  to 
pledg-e  (47).      What  applies  to  one  individual  applies  to  all. 

61  If,  then,  all  borrowers  who  can  comply  with  the  rules 
as  to  security,  are  accommodated  with  money;  if  the  rules 
do  not  discriminate  in  favor  of  certain  securities  and  against 
others,  as  is  the  case  now  (  19-21 )  ;  if  everything  that  has  a 
market  value  can  be  used  as  a  basis  for  credit  In  the  form  of 
paper  money,  hov,''  could  there  be  too  little  money.? 

62  The  same  reasoning  applies  to  the  opposite — too  much. 
If  only  such  as  could  comply  with  the  rules  are  furnished 
money,  how  could  there  be  too  much.'' 

63  It  is  truly  difficult  in  some  instances  to  show  up  an 
absurdity.  In  this  case,  the  difficulty  consists  in  the  fact  that 
the  parties  who  talk  about  too  much  money,  have  really 
nothing  definite  in  their  minds  when  they  make  the  state- 
ment. Unless  you  know  what  an  opponent  means,  how  can 
you  discuss  it?  And  if  he  does  not  know  himself,  how  can 
anyone  else?  The  only  way  to  do  is  to  take  the  statement 
for  what  it  is  worth.  "Too  much  money !"  The  bare  state- 
ment is  as  meaningless  as  blows  struck  with  a  cane  on  the 
sidewalk.     If  it  is  stated  of  a  depreciated  paper  money,  then 


TOO    MUCH    MONEY  33 

there  must  be  a  supplemental  statement,  expressing  in  pro- 
portion to  what  is  there  too  much  money.  It  is  not  the  vol- 
ume of  money  in  itself  that  affects  its  purchasing  power,  but 
the  proportion  of  volume  to  security.  Whatever  holds  good 
with  regard  to  one  paper  dollar,  applies  with  equal  force  to 
any  number  of  paper  dollars.  To  illustrate:  The  amount 
of  security  that  will  sustain  one  paper  dollar  in  circulation  at 
its  face  value,  multiplied  any  number  of  times  will  sustain 
that  number  of  paper  dollars  in  circulation  at  their  face  value. 
If  additional  paper  money  is  issued  without  additional  secur- 
ity, the  purchasing  power  of  that  paper  money  will  be 
reduced  in  proportion;  but  if  an  additional  amount  is  issued, 
with  additional  security  in  the  same  proportion,  the  addition 
to  the  volume  of  paper  money  will  not  affect  its  purchasing 
power,  provided  the  security  is  ready  at  any  time,  or  at  any 
definite  stated  time  not  too  remote,  to  redeem  it;  and  pro- 
vided the  facts  are  well  known  and  there  are  no  parties  who 
are  deceiving  the  public  in  regard  to  them. 

64  The  trouble  with  those  who  honestly  maintain  the 
opinion  that  the  Mutual  Credit  System  would  result  in  too 
much  money,  is  that  they  apply  to  this  system  the  reason- 
ing that  applies  to  the  specie  basis  system.  In  that  sys- 
tem specie  is  the  basis  of  the  issue,  that  is,  paper  money  is 
issued  in  place  of  coin;  and  it  follows  that  the  more  pa- 
per money  issued  in  proportion  to  the  coin  it  is  issued  on, 
the  less  basis,  and  the  less  the  chances  of  getting  the  coin 
when  it  is  demanded.  One  dollar  in  coin  cannot  redeem 
more  than  one  dollar  in  paper,  and  when  there  are  two 
dollars  in  paper  to  one  in  coin,  it  is  inflation.  The  more 
paper  money  issued  in  excess  of  the  security  it  is  issued  on, 
the  more  inflation  and  the  less  its  purchasing  power,  is 
perfectly  correct;  but  the  theory  has  prevailed  so  long  and 
is  so  universal,  that  paper  money  must  be  redeemable  in 
coin,  and  as  coin  is  an  exceedingly  scarce  commodity,  the 
idea  of  plenty  of  paper  money  has  become  associated  with 
that  which  is  impossible.  Such  reasoning,  however,  is  with- 
3 


34  THE    NEW    PHILOSOPHY    OF    MONEY 

out  foundation,  and  results  from  the  failure  to  correctly  under- 
stand the  Mutual  Credit  System.  In  the  specie  basis  system, 
as  we  have  seen,  there  is  no  escape  from  either  one  of  two 
evils;  a  volume  of  money  limited  to  the  quantity  of  coin  or 
inflation;  but  under  the  Mutual  Credit  System  there  can 
be  plenty  of  money  without  inflation. 

65  The  argument  that  "when  gold  is  used  as  money 
there  is  no  doubt  about  its  value  (200),  as  there  is  about 
paper  money,"  applies  to  gold  only,  not  to  paper  money 
issued  on  gold;  but  as  we  cannot  dispense  with  paper 
money  and  confine  ourselves  to  the  use  of  gold  only, 
the  argument  is  of  no  weight,  and  the  question  at  issue  nar- 
rows itself  down  to  this:  Since  paper  money  is  not  wealth, 
but  a  representative  of  wealth;  since  it  is  not  value,  but 
credit;  and  since  we  cannot  use  wealth,  but  must  use  the 
representative;  since  we  cannot  use  value  in  exchange,  but 
must  resort  to  credit;  how  can  we  devise  a  system  that  will 
supply  credit  in  the  form  of  paper  money,  which  will  con- 
tain the  least  possible  element  of  uncertainty?  And  it  is  in 
answer  to  this  question  that  the  Mutual  Credit  System 
appeals  to  our  judgment  (6). 


CHEAP  MONEY. 

66  Under  this  title,  the  Century  Company,  of  New 
York,  published,  in  1S92,  a  pamphlet,  a  reprint  from  the 
*'Century  Magazine,"  giving  an  account  of  "cheap  money 
experiments  in  past  and  present  times."  Chapter  I,  entitled 
"The  People  and  Finance,"  says:  *'There  are  a  few  ele- 
mentary principles  in  economic  science,  the  mastery  of  which 
by  the  great  body  of  the  American  people  would  be  of  incal- 
culable value  to  us  as  a  nation.  One  of  these  is  that  no  gov- 
ernment can  create  money  out  of  anything  which  it  may 
choose  to  call  money.  Another  is  that  all  classes  of  the  peo- 
ple, rich  and  poor,  laborer  and  employer,  are  far  better  off 
with  a  sound  and  stable  currency  than  they  are  with  any  of 
the  varieties  of  'cheap  money'." 

67  The  great  difficulty  that  besets  an  effort  to  get  a 
clear  comprehension  of  economic  questions  is  the  misunder- 
standing in  the  use  of  terms.  The  question  arises,  what,  in 
reality,  constitutes  a  sound  and  stable  currency,  and  what 
cheap  money?  What  does  the  writer  of  the  statement  just 
quoted  mean  by  these  terms,  and  what  do  these  terms  sig- 
nify in  the  minds  of  those  who  claim  that  money  can  be 
cheap  and  that  there  can  be  plenty  of  it?  There  is  evidence 
all  through  the  pamphlet  that  by  "a  sound  and  stable  cur- 
rency" is  meant  gold,  or  paper  money  that  is  convertible  into 
gold  at  its  face  value.  It  is  also  quite  apparent  that  by  the 
term  "chenp  money"  is  meant  money  that  is  not  sound  and 
stable;  and  by  quoting  the  term  it  is  intended  to  attribute  to 
money  reformers  (those  who  claim  that  money  can  be  plenty 
and  cheap)  a  desire  to  have  or  put  into  circulation  money 
that  is  not  sound  and  stable.  Now,  is  it  reasonable  to  sup- 
pose that  there  are  people  who  deliberately  prefer  a  depreci- 


36  THE    NEW    PHILOSOPHY    OF    MONEY 

ated  paper  money,  or  one  that  is  liable  to  depreciate,  to  one 
that  is  not  liable  to  depreciation?  The  system  advocated  by 
any  particular  set  of  money  reformers  may  be  a  fallacy,  and 
result,  if  put  in  operation,  in  a  depreciated  paper  money;  but 
to  imply  that  such  is  the  end  they  desire  to  attain;  to  attrib- 
ute to  them  the  deliberate  intention  of  trying  to  establish  a 
system  of  money  that  is  not  sound  and  stable,  is  a  perversion 
of  fact,  and  the  one  v^ho  states  it  is  an  unfair  disputant. 
Why  have  we  not  as  much  right  to  accuse  him  of  deliber- 
ately defending  a  system  that  was  devised  and  established  in 
the  interest  of  money-lenders  and  to  the  great  detriment  of 
everybody  else?  It  is  not  true  that  money  reformers  prefer 
to  have  depreciated  money,  nor  is  that  the  end  they  are  striv- 
ing for.  It  is  not  true  that  we  cannot  have  such  an  abund- 
ance of  money  that  no  one  will  say  "money  is  scarce,"  as 
they  do  now,  without  it  becoming  depreciated.  When  a 
money  reformer  speaks  of  the  need  for  cheap  money,  he 
does  not  mean  what  this  writer  does  when  he  speaks  of 
"cheap  money."  The  former  means  a  low  rate  of  interest, 
which  is  the  price  we  pay  for  money ;  using  the  term  cheap  in 
the  same  sense  that  we  do  when  we  say,  "potatoes  are  very 
cheap  this  year,"  or  "strawberries  are  cheap  at  this  season  of 
the  year."  The  quality  is  not  referred  to  at  all.  But  this 
writer  does  not  refer  to  the  rate  of  interest  when  he  says 
cheap  money.  He  means  a  depreciated  pajDcr  money,  and  he 
cites  many  of  the  most  wild  and  delusive  schemes  that  have 
come  and  gone,  to  prove  that  cheap  money  is  a  delusion. 
The  following  from  the  last  chapter  emphatically  declares  it 
to  be  such:  *' We  began  with  a  plain  exposition  of  the  im- 
perative need  on  the  part  of  the  people  of  this  country  of  a 
clear  conviction  that  no  money  except  the  best  was  worth 
the  having,  and  that  'cheap  money'  in  any  and  all  forms  is  a 
delusion  from  which  all  people  should  pray  to  be  delivered." 
Applying  to  the  term  cheap  money  the  definition  which  he 
does,  namely:  depreciated  money  or  money  which  must 
inevitably  depreciate,  everybody  must  necessarily  agree  with 


CHEAP    MONEV  37 

him;  but  applying-  the  meaning  which  money  reformers  have 
in  mind  when  they  use  the  term,  namely:  money,  the  interest 
or  price  of  which  is  low,  who  will  agree  with  him?  Only 
money-lenders,  large  capitalists  and  those  who  are  too  igno- 
rant to  know  any  bettci".  It  is  an  unfair,  not  to  say  dishon- 
est perversion  of  fact.  Continuing,  this  "Cheap  JSIoney  Ret- 
rospect" says:  "From  this  we  passed  to  a  historical  survey 
of  the  more  notable  of  the  many  experiments  which  have 
been  made  in  various  countries  and  times  to  improve  the 
condition  of  states  and  nations  by  making  money  cheap  and 
plentiful." 

68  It  is  not  difficult  to  detect  the  animus  that  prompted 
this  effort  in  the  interest  of  money-lenders,  but  if  evidence  is 
needed,  we  have  not  far  to  go  for  it.  On  the  45th  page  of 
this  pamphlet,  the  writer  says  in  reference  to  the  failure  to 
establish  the  English  Land  Bank  in  1696:  "The  capitalists 
would  not  put  their  money  into  it  because  its  avowed  object 
was  to  injure  them  by  lowering  the  rate  of  interest  and  les- 
sening the  demand  for  existing  money"  (19-21). 

69  Here  we  have  an  admission  that  capitalists  are  opposed 
to  and  exert  their  influence  to  prevent  an  increase  in  the  vol- 
ume of  money,  because  a  scarcity  of  money  keeps  up  the  rate 
of  interest;  and  that  the  failure  to  establish  this  bank  was 
due  to  their  opposition. 

70  This  admission  gives  away  his  case,  for  he  points  out 
no  natural  obstacle  in  the  way  of  plenty  of  money  and  low 
rates  of  interest,  but  presents  numerous  unwise  and  imprac- 
ticable schemes  that  have  failed,  to  prove  the  impossibility  of 
its  attainment,  while  he  inadvertantly  admits  that  it  is  really 
the  opposition  of  the  money  power  that  has  prevented  it. 
How  empirical  is  this  attempt  at  instruction  can  be  appreci- 
ated when  it  is  realized  that  the  money  power  rules  in  conse- 
quence of  the  ignorance  and  superstition  of  the  masses;  when 
it  is  fully  comprehended,  as  set  forth  in  The  New  Philoso- 
phy of  Money,  that  the  money  borrower  with  good  security 
is  not  dependent  upon  the  money-lender,  except  as  the  law, 


3B9183 


38  THE    NEW    PHILOSOPHY    OF    MONEY 

made  at  the  dictation  and  in  the  interest  of  the  money-lender, 
is  supposed  to  make  him  so.  But  not  even  does  the  law,  nor 
can  it  make  him  dependent,  and  the  realization  of  cheap 
money  and  plenty  of  it,  is  only  a  question  of  enlightenment 
and  freedom  from  superstition. 

71  There  are  a  few  elementary  principles  in  economic 
science,  the  mastei"y  of  which  by  the  "great  financiers,"  pro- 
fessors and  those  who  presume  to  instruct  the  people  through 
the  magazines  and  the  press  generally,  would  be  of  incalcul- 
able value  to  us  all,  individually  and  collectively.  One  of 
these  is  that  this  government  has  not  and  never  had  any 
authority  to  imj^ose  a  tax  on  the  issue  of  paper  money  unless 
it  is  imposed  on  all  issues  alike;  it  has  no  constitutional  right 
to  discriminate  in  favor  of  any  jjarticular  issue.  Another  is 
that  the  Mutual  Credit  System  will  furnish  plenty  of  cheap 
money  that  the  money  power  will  not  be  able  to  depreciate. 
They  are  playing  fast  and  loose  with  the  most  serious  and 
vital  question  we  are  confronted  with ;  saying  to  the  people 
who  know  little  or  nothing  of  the  subject:  "abandon  all  hope 
of  plenty  of  money  or  low  rates  of  interest";  and  in  order  to 
induce  them  to  believe  it  and  resign  themselves  to  the  hard- 
ships the  present  money  system  imposes,  they  are  treated  to 
a  rehash  of  all  the  stupid  schemes  that  speculators,  money- 
sharks  and  political  tyrants  have  been  able  to  foist  upon 
the  people,  as  though  these  contained  the  least  particle  of 
evidence  that  cheap  money  and  plenty  of  it  is  not  a  possi- 
bility. 


THE  "PER  CAPITA"  DELUSION. 

72  According  to  the  United  States  Treasury  Report  for 
the  month  of  IMarch,  1S94,  the  volume  of  money  in  circula- 
tion was  $24.85  per  capita.  The  method  pursued  in  order  to 
obtain  this  data,  is  as  follows:  From  the  total  amount  of  coin 
money  minted,  and  paper  money  printed  and  issued  is 
deducted,  as  near  as  can  be  ascertained,  the  amount  lost  or 
destroyed;  the  coin  money  consumed  in  the  arts  and  manu- 
factures, and  the  difference  between  the  amount  imported 
and  exported,  and  also  the  amount  of  paper  money  with- 
drawn from  circulation  is  taken  into  account.  From  the 
amount  thus  arrived  at,  called  the  "greneral  stock,"  is  de- 
ducted the  amount  in  the  treasury.  The  balance  is  said  to 
be  in  circulation. 

73  The  phrase  "in  circulation''  is  misleading.  It  conveys 
the  idea  that  the  amount  to  which  it  refers  is  actually  circu- 
lating— being  exchanged  for  commodities  and  services — 
whereas  a  proportion  of  it  (no  one  can  tell  how  much),  is 
hoarded;  there  is  constantly  a  large  amount  lying  idle  in  safe 
deposit  vaults  and  in  banks;  the  amount  destroyed  and  the 
excess  exported  compared  with  the  amount  returned  cannot 
be  even  approximately  estimated,  and  not  all  the  jewelers 
and  manufacturers  who  employ  the  "precious"  metals  report 
the  amount  of  coin  they  consume;  so  that  this  data  is  largely 
guesswork.  But  suppose  it  were  accurate  and  reliable.  Let 
it  be  admitted  that  there  is  twice,  or  even  four  times  that 
much  money  "in  circulation."  What  of  it?  Of  what  advant- 
age is  it  to  borrowers  who  have  security  that  is  acceptable  to 
money-lenders,  but  who  cannot  afford  to  pay  the  rate  of 
interest  they  charge,  to  know  that  these  money-lenders  have 


4©  THE    NEW    PHILOSOPHY    OF    MONEY 

plenty  of  money  to  loan?  Of  what  good  is  it  to  the  people 
whose  security  is  rejected  by  the  money-lenders,  to  know 
that  they  have  plenty  of  money  to  loan?  The  financial  jour- 
nals and  the  press  of  the  country  generally,  mock  at  the  dis- 
tress of  the  people  when  they  say  "there  is  plenty  of  money 
in  the  country."  It  is  as  reasonable  as  it  would  be  to  tell 
people  who  are  suffering  from  a  scarcity  of  ice  in  midsum- 
mer, that  there  is  plenty  of  ice  at  the  north  pole;  or  to  the 
traveler  in  the  desert  of  Sahara  who  is  perishing  with  thirst, 
that  there  is  plenty  of  cool  water  a  thousand  feet  beneath 
him.  Of  what  use  is  it  that  "there  is  plenty  of  money 
in  the  country,"  if  those  who  need  it  cannot  get  it?  For 
whom  is  there  "plenty  of  money  ?"  For  the  money-lend- 
ers?    There  is  always  too  much  for  them. 

74  If  money  is  a  tool,  why  reason  in  regard  to  it  differ- 
ently from  the  way  we  reason  with  regard  to  any  other  tool? 
How  strange  it  would  appear  to  our  judgment  if  the  claim 
were  put  forward  that  there  are  too  many  vessels  to  drink 
out  of;  that  the  number  should  be  limited  to  so  many  per 
capita,  whereas  there  are  many  times  that  number;  that  the 
quantity  manufactured  should  be  restricted  so  that  there 
never  could  be  more  than  so  many  for  each  individual  of  the 
entire  population  at  any  given  time.  "How  stupid!"  most 
people  will  exclaim.  "It  would  be  very  inconvenient  to  try 
to  get  along  with  a  tenth  or  a  twentieth  of  the  number  of 
cups,  glasses,  mugs,  etc.,  and  the  inconvenience  would  be  a 
far  greater  evil  than  the  cost  of  these  articles;  besides  if  only 
a  few  could  make  such  things,  or  if  there  were  only  so 
many  made  prices  would  go  up,  the  rich  would  buy  all  they 
wanted  and  the  poor  could  not  get  any!"  But  to  limit  the 
volume  of  money  (19-21)  to  so  many  dollars  per  capita, 
which  most  peoj^le  are  reconciled  to,  is  equally  as  stupid. 
Suppose  all  the  money  in  the  whole  country  were  offered  to 
borrowers  who  had  good  security,  at  one  per  cent  per  annum. 
How  long  would  it  take  to  exhaust  the  whole  pile?  And 
what  would  the  rest  of  the  borrowers  do  who  came  after  all 


THE    PER    CAPITA    DELUSION  4I 

the  money  had  been  loaned  ont?  If  there  is  enough  security 
in  the  country  free  from  incumbrance,  the  money  would  all 
be  borrowed  in  loss  than  a  week.  If  this  is  correct,  then  the 
rate  of  interest  determines  very  largely  the  amount  of  money 
that  will  circulate.  If  interest  is  very  high,  large  amounts 
of  money  will  lie  idle  in  the  banks.*  If  interest  is  low 
enough,  all  the  money  will  be  borrowed  that  can  be  fur- 
nished (35,  60)  until  all  labor  is  employed  and  all  enterpris- 
ing individuals  are  fully  engaged,  and  therefore  (if  that  time 
should  ever  come)  no  additional  money  will  be  needed. 

75  What,  then,  has  the  number  of  individuals  in  a  country 
to  do  with  the  volume  of  money?  It  is  claimed  now  that 
there  is  plenty  of  money.  According  to  Mr.  Bennett's  esti- 
mate (11S-126)  the  wealth  in  the  United  States  amounts  to 
$72,000,000,000;  and  according  to  the  United  States  Treas- 
urer's Report  for  April,  1894,  the  total  amount  of  paper 
money  representing  that  wealth  was  $1,081,499,370,  or  a 
proportion  of  about  one  dollar  credit  in  the  form  of  paper 
money  for  every  sixty-six  dollars  worth  of  wealth.  Is  it  any 
wonder  these  manipulators  of  the  currency  would  rather 
give  the  volume  of  money  per  capita — $24.85  per  head — 
than  $1.00  per  every  $66.00  of  the  wealth.  Mr.  Bennett 
also  shows  (121)  that  the  interest  charge  on  the  active  capi- 
tal of  the  country  is  $3,300,000,000.  It  follows,  therefore, 
that  if  all  this  interest  were  paid  in  paper  money,  all  there  is 
in  the  country,  which  is  not  one-third  the  amount  of  this 
interest  charge,  would  have  to  pass  into  the  hands  of  the 
capitalists  three  times  during  the  year  and  then  there  would 
still  be  a  trifle  over  $50,000,000  unpaid. 

76  Overwhelmingly  crushing  as  this  evidence  is  of  the 
imbecility  or  knavery  (which?)  of  those  who  control  the 
currency,  and  of  the  utter  stupidity  of  the  per  capita  idea  of 


*To  those  who  control  money,  the  incentive  to  keep  up  the  rate  of 
interest  is  that  if  there  is  great  demand  they  get  high  rates  on  all 
they  have  to  loan.  If  they  only  loan  half  what  thev  have  at  10  per 
cent  it  is  equal  to  5  per  cent  on  the  whole;  whereas  if  thev  loan  two- 
thirds  at  6  per  cent  it  would  be  only  4  per  cent  on  the  whole. 


A2  THE    NEW    PHILOSOPHY    OF    MONEY 

the  volume  of  money  needed,  their  confusion  can  be  still 
worse  confounded  by  additional  evidence.  Mr.  Bennett 
says  (122):  "At  the  very  lowest  estimate,  $897,000,000 
must  be  charged  yearly  to  government  in  the  United  States, 
not  including  the  payment  of  the  principal  of  the  public  debt. 
This  representing  money  spent  outside  of  regular  business    . 

.  .  Is  it  any  wonder  that  we  have  financial  panics  when 
the  volume  of  money  is  so  contracted,  compared  with  the 
enormous  duty  it  has  to  perform  ?" 

77  So,  not  only  does  all  this  m.oney  have  to  pass  three 
times  during  the  year  into  the  possession  of  the  capitalists 
in  paj'ment  for  the  use  of  their  capital,  but  more  than  four- 
fifths  of  it  must  also  pass,  during  the  same  period,  into  the 
hands  of  government  officials  to  satisfy  all  the  various  de- 
mands it  makes  upon  us.  And  all  this  in  addition  to  its  func- 
tion in  the  exchange  of  commodities,  which  is  beyond  power 
to  estimate.  Of  course  the  answer  to  this  argument  to  show 
the  necessity  for  more  money,  which  the  conservatives  and 
the  superficial  will  make,  will  be  the  statement  that  checks, 
drafts  or  bills  of  exchange,  etc.,  are  so  extensively  used  that 
about  nine-tenths  of  all  exchanges  are  settled  by  means  of 
them  and  only  about  one-tenth  by  the  use  of  money.  But 
since,  to  get  a  draft  or  use  a  check  one  must  first  have  the 
money,  their  use  does  not  affect  the  argument  in  the  least, 
and  the  fact  remains  that  the  demands  for  money  cannot 
possibly  be  met  with  the  volume  of  money  available;  and 
while  there  is  no  way  of  determining  how  much  money  is 
really  necessary  to  perform  conveniently  such  an  enormous 
aggregate  of  payments,  it  is  probable  that  twenty  times  what 
we  now  have  will  be  in  constant  circulation  under  the  Mutual 
Credit  System. 


CREDIT. 

7S  "If  there  exists  an  agency  of  unquestioned  power,  it 
surely  is  that  of  credit.  Who  does  not  admire  its  wonderful 
potency?  "Who  does  not  recognize  the  mighty  share  which 
is  due  to  it  in  the  economic  development  of  the  present 
age  ?"* —  Cyclopcedia  of  Political  Science. 

79  In  discussing  a  vast  and  complicated  question,  such  as 
economics,  it  is  indispensable  that  the  matter  of  terminology 
should  be  well  understood  and  mutually  agreed  upon  by  all 
parties  to  the  discussion.  The  definitions  for  the  term  credit 
the  writer  has  thus  far  met  with,  seem  inadequate,  and  he 
has  ventured  to  formulate  such  as  will  more  clearly  define  it 
as  applied  in  The  New  Philosophy  of  Money,  and  hopes 
there  will  be  no  cause  for  rejecting  them. 

So  The  term  credit  designates  all  transactions  that  are 
not  barter,  or  settlement  on  the  spot  by  the  exchange  of 
equivalents  in  value,  or  that  which  is  accepted  as  such. 

81  Coin  money  being  value  and  accepted  as  such  in 
exchange  for  commodities,  transactions  with  coin  money  are 
not  credit  transactions,  but  must  be  defined  as  barter. 

82  Credit  is  divided  into  two  kinds  or  forms.  One  is 
secured  credit,  the  other  is  unsecured  credit  (9). 

83  Paper  money  is  a  form  of  credit,  and  should  be 
secured  credit. 

84  An  appropriate  definition  for  secured  credit  would 
see.n  to  be:  debt  incurred  with  ample  provision  made  to 
insure  payment. 

85  A  promissory  note  secured  by  a  pledge  of  collateral, 
such  as  a  mortgage  note,  etc.,  is  secured  credit. 


*I{  the  above  can  be  said  of  credit  generally,  it  can  much  more 
emphaticallv  be  said  of  that  form  of  credit  furnished  by  the  Mutual 
Credit  System — secured  credit  (S3). 


44  THE    NEW    PHILOSOPHY    OF    MONEY 

S6  A  simple  unsecured  promissory  note  is  unsecured 
credit.  Book  accounts  are  generally  unsecured  credits.  It 
might  be  argued  that  coin  is  accepted  as  money  and  not  as 
value;  that,  with  the  exception  of  a  few  manufacturers  who 
melt  it  up  to  consume  it,  people  do  not  use  it  otherwise  than 
they  do  paper  money.  Very  true ;  6ui  it  is  taken  because  it 
has  value.  It  would  not  be  taken  if  it  had  none.  If  the 
government  were  to  reduce  the  gold  and  silver  in  its  coins  to 
one-half  what  they  contain  now,  their  purchasing  power 
would  decline  one-half, — while  credit  money  is  taken  because 
it  is  believed  that  it  is  ultimately  to  be  taken  up  out  of  circu- 
lation by  giving  for  it  what  its  face  calls  for  in  mai-ket  value. 
The  distinguishing  feature  between  the  two  kinds  of  money 
— credit  money  and  commodity  money — is  the  fact  that  the 
former  is  what  the  adjective  credit  signifies, — an  obligation 
to  pay  which  some  one  has  contracted  to  meet,  and  has 
pledged  enough  value  to  guarantee  those  who  take  it,  that  it 
will  be  met  and  paid  at  maturity.  This  is  what  they  rely 
on,  and  not,  as  in  the  case  of  coin  money,  on  the  market 
value  of  the  material  of  which  it  is  made. 

87  This  latter  money,  on  the  other  hand,  is  not  credit. 
There  is  no  obligation  or  agreement  whatever,  on  the  part 
of  anyone.  It  is  recognized  by  what  it  states  on  its  face,  as 
to  what  it  is,  and  it  is  accepted  as  such.  There  is  no  promise 
on  the  part  of  anyone,  as  in  the  case  of  credit  money,  that  it 
will  be  taken  in  exchange  for  anything  else  at  any  specified 
time. 

88  It  would  appear  that  enough  has  beer  said  to  demon- 
strate that  paper  money  is  credit  money,  and  that,  therefore, 
the  exchange  of  commodities  for  paper  money  is  a  credit 
transaction;  and  that  coin  money  being  wealth — market 
value — there  being  nothing  in  the  nature  of  credit  about  it, 
and  that  those  who  take  it  rely  entirely  upon  the  market 
value  it  contains  that  they  will  be  able  to  exchange  it  at  its 
face  value  for  other  commodities,  and  that  if  it  fails  they 
have  no  recourse  but  to  suffer  the  loss,  it  must  be  defined  as 


CKKLMT  45 

commodity  moneys  and  th;it  tlic  exchange  of  commodity 
money  for  commodities  is  in  the  nature  of,  and  must  there- 
fore be  defined  as  barter  (65). 

S9  It  will  hardly  be  necessary  to  present  argument  to 
show  that  there  are  two  forms  of  credit — secured  and  unse- 
cured— or  that  it  is  correct  and  desirable  as  well  as  convenient 
to  thus  classify  them  (9). 

90  Probably  no  one  will  object  to  the  statement  that 
credit  in  the  form  of  paper  money  should  be  secured  credit; 
or  to  the  classification  made  with  reference  to  secured  and 
unsecured  credit.  Certainly  unsecured  notes  and  book 
accounts  as  they  are  generally  conducted,  or  when  no  pro- 
vision is  made  to  insure  payment,  are  unsecured  credit. 

91  As  to  the  definition  for  secured  credit — debt  incurred 
with  ample  provision  made  to  insure  payment — the  writer 
would  be  glad  to  have  anyone  suggest  a  better, 

92  We  now  come  to  a  point  in  the  discussion  of  this 
question  of  credit  where  the  enormous  advantages  of  the 
Jklutual  Credit  System  can  be  still  further  indisputably 
demonstrated. 

93  It  will  be  granted,  of  course,  that  secured  credit  is  bet- 
ter than  unsecured  credit;  that  paj^er  money  that  circulates 
at  its  face  value  in  payment  of  debt  and  in  exchange  for  com- 
modities is  better  than  book  accounts  or  promissory  notes. 
It  is  more  useful  and  therefore  more  desirable.  This  propo- 
sition, it  would  seem,  is  too  apparent  to  require  argument. 
Since  the  actual  cost  of  paper  money  is  insignificant,  much 
less  than  bookkeeping  the  same  amounts,  why  is  it  that 
credit  does  not  take  that  form?  Why  is  it  that  credit  almost 
universally  takes  the  unsecured  form,  although  it  is  the  least 
desirable,  the  most  inconvenient  and  the  most  costly .''  It  is 
not  easy  to  explain  many  of  the  strange  phenomena  con- 
nected with  man  and  his  methods,  but  it  is  not  difficult  to 
realize  that  when  he  follows  the  most  inconvenient  of  the 
various  ways  open  to  him,  it  must  be  because  he  is  ignorant. 

94     We  do  not  see  people  walking  up  six  or  ten  flights  of 


46  THE    NEW    PHILOSOPHY    OF    MONEV 

stairs  in  preference  to  taking  the  elevator,  or  go  long  dis- 
tances to  talk  with  some  one  when  they  could  just  as  well 
"hello"  to  him  by  means  of  the  telephone.  They  are  not  in 
the  habit  of  hiring  wagons  in  preference  to  traveling  on  rail- 
roads, nor  do  they  go  walking  (intentionally)  where  the  mud 
or  snow  is  deepest.  Why,  then,  do  they  not  follow  this  pro- 
pensity to  save  labor  and  avoid  inconveniences  in  the  matter 
of  exchange  as  well  as  getting  up-stairs,  talking  to  one 
another  at  a  distance,  or  a  thousand  other  things  that  are  done 
in  the  most  convenient  and  least  laborious  way  that  is  known? 
There  can  be  only  one  answer  to  this  question.  It  is  the 
logic,  as  well  as  the  fact  that  they  are  ignorant.  The  means 
are  at  their  command  at  any  time  to  put  an  end  to  unsecured 
credit  by  establishing  Mutual  Credit  Associations  to  furnish 
certificates  of  credit, — paper  money  secured.  This  sectwed 
credit  being  cheajoer,  vastly  more  convenient  and  far  safer, 
would  gradually  take  the  place  of  book  credit,  promissory 
notes  and  other  forms  of  unsecured  credit.  If  it  has  not  been 
done,  it  is  because  of  the  general  prevailing  ignorance  on 
this  subject. 

95  In  "Mutual  Banking,"  page  50,  I  find  the  following: 
"AH  the  questions  connected  with  credit,  the  usury  laws, 
etc.,  may  be  forever  set  at  rest  by  the  establishment  of 
Mutual  Banks.  Whoever  goes  to  the  Mutual  Bank  and 
offers  real  property  in  pledge,  may  always  obtain  money: 
for  the  Mutual  Bank  can  issue  money  to  any  extent;  and  that 
money  will  always  be  good,  since  it  is  all  of  it  based  on  actual 
property  that  may  be  sold  under  the  hammer.  The  interest 
will  always  be  at  a  less  rate  than  one  per  cent  per  annum, 
since  it  covers,  not  the  insurance  of  the  money  loaned,  there 
being  no  such  insurance  required,  as  the  risk  is  0;  since  it 
covers,  not  the  damage  which  is  done  the  bank  by  keeping 
it  out  of  its  money,  as  that  damage  is  also  0,  the  bank  having 
always  an  unlimited  supply  remaining  on  hand,  so  long  as  it 
has  a  printing  press  and  paper;  since  it  covers,  plainly  and 
simply,  the  mere  expenses  of  the  institution, — clerk  hire, 
rent,  printing,  paper,  etc.  And  it  is  fair  that  such  expenses 
should  be  paid  under  the  form  of  a  rate  of  interest;  for  thus 
each  one  contributes  to  bear  the  expenses  of  the  bank,  and  in 


CREDIT  47 

the  precise  proportion  of  the  benefits  he  individually  experi- 
ences from  it.     Thus,  the  interest,  properly  so  called,  is  0: 
and  we  venture  to  predict  that  the  Mutual  Bank  will  one  day 
give  all  the  real  credit  that  will  be  given;  for  since  this  bank 
will  give  such  at  0  per  cent  interest  per  annum,  it  will  be 
ditlicult  for   other   institutions   to  compete  with  it  for  any 
length  of  time.     The  day  is  coming  when  everything  that  is 
bought  will  be  paid  for  on  the  spot,  and  in  mutual  money; 
when  all  payments  will  be  made,  all  wages  settled  on  the 
spot.     The  Mutual  Bank  will  never,  of  course,  give  personal 
credit;  for  it  can  issue  bills  only  on  wealth.     It  cannot  enter 
into  partnership  with  anybody ;  for,  if  it  issues   bills  where 
there  is  no  real  guaranty  furnished  for  their   repayment,  it 
vitiates  the  currency  and  renders  itself  unstable.     Personal 
credit  will  one  day  be  given  by  individuals,  only;   that  is, 
capitalists  will  one  day  enter  into  partnership  with  enter- 
prising and  capable  men  who  are  without  capital,  and  the 
profits  will  be  divided  between  the  parties  according  as  their 
contract  of  partnership  may  run.     Whoever,  in  the  times  of 
the  Mutual  Bank,  has  property,  will  have  money,  also;  and 
the  laborer  who  has  no  property  will  find  it  very  easy  to  get 
it;  for  every  capitalist  will  seek  to  secure  him  as  a  partner. 
All  services  will  then  be  paid   for  in  ready  money  and  the 
demand  for  labor  will  be  increased  three,  four  and  five  fold. 
95a     "As  for  credit  of  the  kind  that  is  idolized  by  the  pres- 
ent generation,  credit  which  organizes  society  on  feudal  prin- 
ciples, confused   credit,    the  Mutual  Bank  will  obliterate  it 
from  the  face  of  the    earth.       Money  furnished  under  the 
existing  system,  to  individuals  and  corporations  is  principally 
applied  to  speculative    purposes,  advantageous,  perhaps,  to 
those  individuals  and  corporations,  if  the  speculations  answer; 
but  generally  disadvantageous  to  the  community,  whether 
they  answer  or  whether  they  fail.       If  they  answer,  they 
generally  end  in  a  monopoly  of  trade,  great  or  small,  and  in 
consequent  high  prices;  if  they  fail,  the  loss  falls  on  the  com- 
munity.     Under  the  existing  system  there  is  little  safety  for 
the  merchant.     The  utmost  degree  of  caution  practicable   in 
business  has  never  yet  enabled   a  company   or  individual  to 
proceed  for  any  long  time  without  incurring  bad  debts. 

95(5  "The  existing  organization  of  credit  is  the  daughter 
of  hard  money,  begotten  upon  it  incestuouslv  by  that  insuffi- 
ciency of  circulating  medium  which  results  from  laws  mak- 
ing specie   the   sole   legal  tender.       The   immediate  conse- 


48  THE    NEW    PHILOSOPHY    OF    MONEY 

quences  of  confused  credit  are  want  of  confidence,  loss  of 
time,  commercial  frauds,  fruitless  and  repeated  applications 
for  payment,  complicated  with  irregular  and  ruinous  expenses. 
The  ultimate  consequences  are  bad  debts,  expensive  accom- 
modation loans,  law  suits,  insolvency,  bankruptcy,  separation 
of  classes,  hostility,  hunger,  extravagance,  distress,  riots,  civil 
war,  and,  finally,  revolution.  The  natural  consequences  of 
mutual  banking  are,  first  of  all,  the  creation  of  order  and  the 
definitive  establishment  of  due  organization  in  the  social 
body;  and  ultimately  the  cure  of  all  the  evils  which  flow 
from  the  present  incoherence  and  disruption  in  the  relations 
of  production  and  commerce." 


COST. 

96  Ruskiu  says:  "Value  is  the  life-giving  power  of 
anything;  cost,  the  quantity  of  lahoi"  required  to  produce 
it;  price,  the  quantity  of  labor  which  its  possessor  will  take 
in  exchange  for  it." 

97  Josiah  Warren,  in  his  "True    Civilization'"   (a  work 
which,  unfortunately,  is  out  of  print),  laid   down  the  princi- 
ple that  cost  should  be  the  limit  of  -price.     He  did  not  mean 
that  there  should  be  a  law  prohibiting  people  from  charging 
more  than  cost,  but  that  long  experience  as  a  merchant  and 
profound  study  on  the  sul)jcct  had  brought  him  to  the  con- 
clusion that  that  statement  embodied  a  principle  that  perfect 
freedom  in  production  and  exchange  would  demonstrate  to 
be  correct,  because  it  would  be  the  residt  that  we  should  attain 
when  all  legislative  interference  ceased.     Ruskinsavs:    "Cost 
is  the  quantity  of  labor  required  to  produce  anything."     These 
writers  agree,  and  their  view  of  it  is  in   harmony  with  The 
New  Philosophy  of   Money.      The  Mutual   Credit  S\stem 
furnishes  certificates  of  credit  at  cost  (95).     Cost,  of  course, 
includes  every  item  of  expense;  from  the  material,  which  is 
concrete  labor,  to  the  finished  product   delivered  to  the   con- 
sumer.      Cost,    therefore,    should    be  the  quantity  of  labor 
required  to  produce,  or  an  equivalent  of  the  amount  required 
to  compensate  all  labor  expended  in  production.     This  should 
be  the  limit  of  price,  because  if   price  exceeds  this  limit,  it 
must  include  a  bonus  to  some  one.     But  who  is  entitled  to 
something  for  which  he  does  not  render  an  equivalent  ?     Un- 
der   the    Mutual    Credit    system,    alone,   can  mutualism    or 
co-operation  be  successful.     Without  it,  capitalists  can  check- 
mate any  effort  in   that  direction  that  they  choose;  but  the 
^Mutual  Credit  System  can  be  inaugurated  without  their  aid 
and  in  spite  of  thicir  opposition.     When  co-operation  becomes 
general,  cost  will  be  the  limit  of  price. 

4 


/ 


VALUE. 

98  What  nobody  wants  has  no  value.      Per  contra:  that 
,   which  people  want,  providing  it  costs  labor  to  produce  it,  has 

\  value;  the  proportion  in  a  given  object  depending  upon  the 
number  of  people  ^vho  want  it,  and  the  ease  or  difficulty  with 
which  it  can  be  obtained.  This  is  market  or  exchangable 
value.  The  value  of  an  object,  and,  therefore,  the  relative 
value  of  all  objects,  is  expressed  b}-  means  of  the  abstraction 
which  in  this  country  is  called  "dollar";  more  or  less  value 
being  expressed  by  one  or  any  multiple  or  fraction  thereof. 
Thus  we  say  $1.01, — one  dollar  and  one  cent — or  one  dollar 
and  the  one-hundredth  part  of  one  dollar;  the  t^vo  last  fig- 
in-es  running  from  i  to  99  and  expressing  that  many  hun- 
dredths of  a  dollar.  This  conventional  teim,  whatever  it  may 
be  in  any  country,  is  always  also  the  monetary  unit,  and  what 
should  be  but  seldom  is,  secured  credit,  in  the  form  of  paper 
money,  or  value  (wealth)  in  the  form  of  commodity  money 
(coin)  is  divided  up  to  correspond  with  the  value  expressed 
by  this  conventional  term,  thus  facilitating  its  transfer  in 
exchange  for  commodities  in  amounts  corresponding  with 
the  exact  value  of  the  commodities  to  be  exchanged,  or  the 
exact  amount  of  debt  to  be  paid. 

99  There  is  another  kind  of  value,  by  which  is  meant 
utility.  The  portrait  of  a  relative  or  dear  friend  has  a  utility 
for  those  whose  friend  he  or  she  was;  its  possession  affords 
pleasure.  It  may  or  may  not  have  a  market  value.  The  air 
has  no  market  value,  but  it  has  a  utilit}^  value — Ave  could  not 
live  without  it.  If  a  method  could  be  discovered  by  which 
it  could  be  bottled  up  or  pumped  into  tanks,  no  doubt  Con- 
gress would  grant  special  privileges  to  a  few  to  deprive  the 
rest  of  it,  like  it  has  done  with  the  land,  and  sell  it  to  them  at 


VALUE 


5^ 


a  high  price.  It  would  then  have  a  market  value.  That 
which  adds  to  our  comfort,  affords  etijoyment,  in  short,  what- 
ever satisfies  want,  has  utility  value.  But  not  all  things 
which  have  utility  value  have  market  or  exchangable  value. 
Tslarket  value  represents  labor,  or  monopoly  and  labor.  If 
there  were  no  monopoly,  nothing  would  be  exchangable  but 
labor,  either  in  the  form  of  service  or  in  that  concrete  form 
we  call  commodities. 


COMPETITION. 

lOO  "Competition,"  says  the  "Twentieth  Century,"*  "is 
but  a  civilized  mode  of  warfare."  The  "Century  Dictionary" 
defines  it  as:  "i.  The  act  of  seeking  or  endeavoring  to  gain 
what  another  is  endeavoring  to  gain  at  the  same  time;  com- 
mon contest  or  striving  for  the  same  object;  rivahy;  as  the 
conipctitio?z  of  two  candidates  for  an  office.  2.  A  trial  of 
skill  proposed  as  a  test  of  superiority  or  comparative  fitness." 
The  "Twentieth  Century"  continues: 

loi  "It  is  not  less  cruel  than  the  former  method  of  shoot- 
ing or  slashing  one's  opponent.  Success  in  either  case  means 
the  ruin  and  often  the  death  of  the  weaker  party.  The 
more  humane,  the  one  who  shrinks  from  needless  slaughter, 
often  pays  for  his  humanity  with  crushing  defeat.  If  we  are 
to  continue  the  competitive  system  we  must  be  merciless  and 
cold  blooded  in  our  competition  as  on  our  battlefields.  If  we 
shrink  from  the  necessary  consequences  of  such  policy  let  us 
.strive  for  the  Co-operative  Commonwealth.  It  is  the  only 
alternative.  Commercial  warfare  counts  more  victims  yearly 
than  the  clash  of  armies.  The  roll  of  suicides,  murders, 
thefts,  defalcations,  embezzlements,  forgeries,  bankruptcies 
and  starvations  chargeable  to  the  competitive  system  in  1S93 
is  a  greater  aggregate  of  disasters  than  is  recorded  of  any 
war  of  conquest." 

102  The  "Twentieth  Century"  is  mistaken.  In  the  first 
place,  the  present  system  of  production  and  exchange  cannot 
correctly  be  called  the  competitive  system.  A  competitive 
system  is  one  in  which  everything  is  subject  to  competition, 
while  the  present  system  is  dominated  by  monopoly,  which 
is  the  opposite  of  competition.  The  evils  of  which  the 
"Twentieth  Century"  complains  are  the  result  of  the  ahsc}icc 
of  competition.  The  money  power,  availing  itself  of  the 
ignorance  of  the  people,  secures  legislation  which  excludes 
competition  in    supplying  that  form  of  credit    called  paper 

*April  12,  1894, 


CO.MI'KTITIOX 


53 


money.  By  thus  limiting  credit  (15)  nnd  by  securing  fran- 
chises through  the  power  money  lias  acquired  in  consequence 
of  its  having  been  made  artificially  scarce  (359),  the  large 
capitalists  defeat  the  competition  they  would  otherwise  be 
subject  to,  while  the  wage-earner  remains  ever  exposed  to  it. 

103  The  abolition  of  interest,  an  abundant  suji^^ly  of 
money  and  the  gradual  reduction  of  dividends,  will  cause  a 
constant  rise  in  wages  (compensation  for  personal  services), 
luitil  finally  wages  absorb  all  the  net  increase  in  wealth  (97). 
Capitalists  will  then  be  sure  of  a  return  of  the  full  amount 
invested,  instead  of  about  ninety-seven  per  cent  losing  part 
or  all  they  invest,  and  only  about  three  per  cent  realizing 
large  fortunes — the  inevitable  result  of  comj^ound  interest 
(126,  130).  This  certainty  about  the  result  of  investments 
of  capital  will  be  the  effect  of  the  abolition  of  speculation. 
Competition,  which  the  JMutual  Credit  System  will  force 
monopoly,  of  whatever  nature,  to  encounter,  by  the  increase 
in  the  volume  of  capital  that  ^vill  result,  will  j^ut  an  end  to 
all  speculation;  for  all  the  wealth  in  the  country  will  be 
actively  employed  as  capital  in  productive  enterprise  as  long 
as  there  are  idle  men  and  women  who  want  emplovment. 
As  production  under  such  conditions  will  be  much  more 
rapid  than  ever  before,  it  will  not  be  long  till  there  will 
result  a  surplus  of  capital,  or  wealth  available  as  capital,  in 
excess  of  the  demand.  Hence,  competition  among  the  capi- 
talists tJo  get  employees.  This  will  be  the  direct  cause  of  the 
rise  in  wages  already  mentioned,  to  the  great  relief  of  wage- 
earners.  How  puerile,  then,  is  this  tirade  on  the  part  of 
Socialists  and  Nationalists  against  competition! 

104  Col.  Greene,  in  his  pamphlet,  "Mutual  Banking," 
says:  "As  soon  as  gold  and  silver  are  adopted  as  the  legal 
tender,  they  are  invested  with  an  altogether  new  utilitv.  By 
means  of  this  new  utility  whoever  monopolizes  the  gold  and 
silver  of  any  country — and  the  currency  is  more  easily 
monopolized  than  any  other  commodity — obtains  control, 
henceforth  over  the  business  of  that  countrv;  for  no  man  can 
pay   his  debts    without    the    permission    of    the    party    who 


54  THE    NEW    PHILOSOPHY    OK    MONEY 

monopolizes  the  article  of  legal  tender.  Thus,  since  the 
courts  recognize  nothing  as  money  in  the  payment  of  debts 
except  the  article  of  legal  tender,  this  party  is  enabled  to  levy 
a  tax  on  all  transactions  except  such  as  take  place  without 
the  intervention  of  credit.  [Without  the  intervention  of 
money,  Col.  Greene  should  have  said,  and  it  is  probable  that 
the  word  "credit"  is  merely  a  typographical  error. — Author.] 
105  "By  adopting  the  precious  metals  as  the  legal  tender 
in  the  payment  of  debts,  society  confers  a  new  value  upon 
them,  which  new  value  is  not  inherent  in  the  metals  them, 
selves.  This  new  value  becomes  a  marketable  commodity. 
This  ought  not  to  be.  .  .  .  This  new  social 
value  is  inestimable;  it  is  incommensurable  with  any  other 
known  value  whatever.  This  money,  instead  of  retaining 
its  proper  relative  position,  becomes  a  superior  species  of 
commodity — superior,  not  in  degree,  but  in  kind.  Thus 
money  becomes  the  absolute  king  and  the  demigod  of  com- 
modities. Hence  follow  great  social  and  political  evils. 
.  .  .  Society  established  gold  and  silver  as  a  circulating 
medium,  in  order  that  exchanges  of  commodities  might  be 
facilitated;  but  society  made  a  mistake  in  so  doing;  for,  by 
this  very  act,  it  gave  to  a  certain  class  of  men  the  power  of 
saying  what  exchanges  sJiall^  and  what  exchanges  sJiall  not 
be  facilitated.'''' 

106  It  would  seem  unnecessary  to  add  to  this  statement. 
Whoever  has  watched  the  course  of  events,  especially  of  late, 
must  know  that  it  is  true.  How  well  he  understood  the 
subject  can  be  readily  perceived ;  yet  he  wrote  it  about  forty 
years  ago.  The  control  of  money  gives  the  same  power 
over  production  and  exchange  of  all  commodities,  that  the 
control  of  the  tools  by  which  any  single  commodity  is  made 
gives  over  the  manufacture  of  that  particular  article.  The 
control  of  money,  then,  excludes  competition  to  a  very  great 
extent,  while  it  makes  interest  artificially  high  by  making 
money  artificially  scarce.  Labor,  on  the  other  hand,  has  no 
means  of  avoiding  competition.  Me«  and  women  must  work 
or  starve,  and  as  new  inventions,  new  discoveries  and  new 
processes  facilitate  j^roduction  with  less  labor,  the  demand  for 
labor  grows  less,  while  competition  among  wage-earners 
grows  greater;  for  those   thrown  out  of  work  which  is  no 


COMPETITION 


DD 


longer  needed  must  enter  other  already  overcrowded  indus- 
tries, and  thus  wages  are  reduced.  Now,  anyone  can  see 
that  if  the  wage-earners  had  gradually  acquired  ownership 
of  the  means  of  production — these  new  inventions,  new  dis- 
coveries and  new  processes — the  advantages  derived  from 
them  would  be  enjoyed  by  the  wage-earners  themselves. 
Instead  of  reducing  wages  and  the  number  of  workers 
^vanted,  it  would  have  increased  wages  and  reduced  the  hours 
of  toil.  And  since  labor  produces  all  wealth,  these  labor- 
saving  utilities  should  belong  to  those  who  produced  them. 
Whatever,  then,  has  prevented  this,  is  the  cause  of  the  evils 
comjDlained  of,  and  not  competition;  for  we  have  seen  that 
on  the  part  of  the  capitalists,  so  far  as  the  supply  of  money 
(which  is  secured  credit)(S3-S4)  is  concerned,  competition 
is  most  effectually  avoided.  Had  the  cajoitalists  been  subject 
to  as  severe  competition  as  wage-earners  have,  then  the  sys- 
tem could  be  called  the  comjDetitive  svstcm;  but  in  that  case, 
the  evils  herein  enumerated,  and  of  which  we  all  realize  their 
enormity,  would  have  entirely  disappeared,  because  the  cap- 
italist, as  a  non-producer  and  an  absorber  of  wealth,  would 
have  disappeared. 

107  In  Mr.  Tucker's  "Instead  of  a  Book,"  page  405,  is 
the  following  interesting  paragraph  on  this  subject:  "The 
supposition  that  competition  means  war  rests  upon  old  notions 
and  false  phrases  that  have  been  long  current,  but  are  rapidly 
passing  into  the  limbo  of  exploded  fallacies.  Competition 
means  war  only  when  it  is  in  some  way  restricted,  either  in 
scope  or  intensity, — that  is,  when  it  is  not  perfectly  free  com- 
petition; for  then  its  benefits  are  won  by  one  class  at  the 
expense  of  another,  instead  of  by  all  at  the  expense  of  na- 
ture's forces.  When  universal  and  unrestricted,  competition 
means  the  most  perfect  peace  and  the  truest  co-operation;  for 
then  it  becomes  merely  a  test  of  forces  resulting  in  their 
most  advantageous  utilization.  As  soon  as  the  demand  for 
labor  begins  to  exceed  the  supply,  making  it  an  easy  matter 
for  evervone  to  get  work  at  wages  equal  to  his  product,  it  is 
for  the  interest  of  all  (including  his  immediate  competitors) 
that  the  best  man  should  win;  which   is  another  way  of  say- 


^6  THE    Nf:W    PlIILOSOPHV    OF    MONEY 

ing  that,  where  freedom  prevails,  competition  and  co-opera- 
tion are  identical." 

loS  The  Mutual  Credit  System  will  destroy  the  specu- 
lative part  of  interest,  reducing  it  to  cost  of  j^roviding  the 
paper  money.  With  the  cessation  of  interest  will  disap- 
pear dividends  and  rent;  profit  being  also  reduced  to  wages 
for  superintendence.  This  will  bring  us  to  the  competitive 
system.  We  are  not  there  yet,  and  it  would  be  well  for  the 
"Twentieth  Century"  to  revise  its  philosophy  and  aid  in  its 
realization,  instead  of  retarding  it  by  leading  the  weak 
minded  and  superficial  into  the  wilderness  of  unsound  ideas;* 
for,  in  the  second  place,  neither  the  Co-operative  Common- 
wealth nor  any  other  organized  body  of  producers  can  possi- 
bly get  along  without  competition.  Is  there  to  be  no  "trial 
of  skill  as  a  test  of  superiority?"  Will  there  be  no  "compet- 
itors for  office?"  Will  there  never  be  "two  or  more  seeking 
or  endeavoring  or  striving  for  the  same  object?"  Will  the 
"Twentieth  Century"  undertake  to  maintain  that  these  evils 
would  have  existed  just  the  same  had  there  been  no  monop- 
oly of  that  form  of  credit  called  paper  money  ?  or  that  they 
will  exist  in  spite  of  the  establishment  of  the  INlutual  Credit 
System,  the  abolition  of  interest  and  an  abundant  supply  of 
monev  ? 


*''Special  legislation  is  a  covetous  pretense  that  usually  steals 
heaven's  livery  the  better  to  serve  the  devil.  Its  pretenses  and  de- 
vices are  many,  but  its  favorite  cloak  is  patriotism,  because  garbed 
therein  and  posing  as  "country'"  it  can  defy  exposure,  few  being 
bold  enough  to  assail  anything  so  sacred  as  country.  The  strong 
hold  of  special  legislation  on  the  people,  and  their  blindness  to  its 
ruinous  effects,  is  because  special  legislation  identifies  itself  with 
country,  and  makes  opposition  thereto  opposition  to  country.  In 
spite,  however,  of  patriotic  pretenses,  the  soul  of  special  legislation  is 
Greed,  that  base,  heartless,  never-satisfied  passion  that  seeks  its 
gratification  regardless  or  in  violation  of  other's  rights  or  sufferings. 
Special  legislation  never  seeks  its  advantage  in  merit  or  honest  cpih- 
fefition^  but  instead,  lavs  hold  of  law  and  makes  law  its  servant  to 
impose  burdens  and  compel  obedience." — '■'■Special  Legtshition  the 
Bane  of  Agriculture^'  by  Le-wis  H.  Blatr 


USURY— INTEREST. 

109  The  Bible  doctrine  of  interest  or  usur}'  is  very  pro- 
nounced. In  the  eighteenth  chapter  of  Ezekiel  it  says:  "The 
soul  that  simeth,  it  shall  die."  And  then  it  goes  on  to  say 
who  are  those  who  shall  escape  this  penalty.  "He  that  hath 
not  given  forth  upon  usury,  neither  hath  taken  an}'  increase. 
.  .  .  He  is  just,  he  shall  surely  live,  saith  the  Lord  God." 
This  is  a  terrible  anathema,  and  it  is  aimed,  not  at  the  body, 
for  all  bodies  die,  but  it  expressly  says  the  soul  shall  die. 
This  evidently  means  annihilation. 

1 10  Other  quotations  might  be  made  equally  as  denunci- 
atory of  the  practice,*  but  this  one  condemns  the  modern 
church  and  all  who  receive  increase,  whether  in  the  form  of 
interest,  rent  or  profit,  which  exceeds  compensation  for  ser- 
vice, who  take  the  Bible  as  their  guide  in  morals.  But  I 
merely  call  attention  to  the  fact  to  show  the  inconsistency  of 
people  who  believe  in  the  divinity  of  the  Bible,  yet  utterly 
disregard  its  teachings  and  defy  its  threats.  It  does  not  con- 
cern us  in  our  investigation.  We  are  interested  in  its  philos- 
ophy.    How  does  the  question  present  itself  on  its  merits.^ 

1 1 1  History  proves  that  the  human  conscience  in  all  ages 
of  the  world  has  condemned  usury;  and  if  there  were  any 
merit  in  altruistic  idealism,  it  would  have  shown  itself  capa- 
ble of  realization  on  this,  the  most  vital  of  all  social  questions. 
The  inequity  of  interest  is  not  a  matter  of  belief.  It  is  sus- 
ceptible of  mathematical  demonstration  (118-126).  Some 
very  interesting  calculations  have  been  made  at  different 
times  showing  its  incompatibility  with  the  natural  order  of 
things  (130).     It  is  not  only  unjust,  but  its  perpetuity  is  an 


*Neh.  5;  Deut  23: 19;  Ps.  15:5;  Exodus  22:25;  Eze.  i8:S,  13;  22: 12; 
Lev.  25:35-37- 


58  THE    NEW    PHILOSOPHY    OF    MONEY 

utter  impossibility.  An  ordinary  fortune  at  compound  inter- 
est would,  in  a  few  generations,  exceed  the  wealth  of  the 
largest  city;  and  in  a  few  more,  the  wealth  of  the  whole 
world. 

113  The  prevalence  of  interest  in  excess  of  cost  and  risk, 
must  be  harmful  or  harmless  in  its  effects  upon  the  social 
bodv.  It  must  be  just  or  unjust  to  the  individuals  who  have 
to  pay  it;  and  these  are  the  items  we  have  to  consider  in 
order  to  settle  the  question  on  its  merits. 

11^  In  a  previous  pamphlet,  "The  Financial  Problem," 
the  reader  will  find  a  comparison  made  between  the  rate  of 
interest  and  the  increase  of  wealth;  showing  that  the  average 
rate  of  interest  is  from  two  to  three  times  the  actual  rate  at 
which  wealth  increases.  Attention  was  called  not  only  to 
this  disparity  between  actual  and  legal  increase,  but  it  was 
shown  that  the  speed  at  which  we  were  apj^roaching  the 
inevitable  collapse  was  being  greatly  accelerated  by  the  fact 
that  interest  was  collected  on  fictitious  values  as  well  as  on 
that  which  is  the  result  of  labor. 

114  The  reader  should  not  fail  to  note  the  frightful  havoc 
that  is  played  with  common  sense,  and  the  uttei  disregard  for 
the  natural  order  and  constitution  of  thing,  when  land  values 
and  the  fictitious  value  added  to  stocks  and  bonds,  and  which 
is  designated  by  the  appropriate  term  "water,"  are  not  only 
sold,  thus  getting  something  for  nothing,  but  are  made  a 
basis  for  interest.  An  individual  buys  a  lot  for  $500,  and 
builds  a  house  on  it  which  costs  him  $1,000.  He  claims  that 
"the  property"  is  now  worth  $3,000,  and  fixes  the  rent 
accordingly.  Admitting  that  his  time  spent  In  choosing  the 
plans  and  watching  the  building  of  the  house  Is  worth 
$500,  we  have  $2,000  as  the  total  cost.  If  he  now  sells  out 
for  $3,000,  what  does  the  extra  $1,000  represent?  Nothing! 
It  is  fictitious  value.  If,  instead  of  selling  for  all  cash,  he 
gets  $2,000  cash  and  takes  a  mortgage  for  $1,000  on  which 
he  receives  Interest,  it  is  interest  on  fictitious  value.  The 
issue  of  bonds  or  stock  by  corporations  without  adding  an 


USURY  —  IN'TEKEST  59 

equivalent  in  real  value  to  the  propcity,  is  fictitious  value,  and 
if  dividends  are  paid  on  it,  it  is  interest  on  fictitious  value. 

115  Now,  if  interest  on  actual  values  is  only  a  slick  way 
of  robbing  people;  if  it  is  contrary  to  and  incompatible  with 
the  natural  order  of  things  (121-122);  how  much  more  so  is 
interest  on  fictitious  values?  If  interest  limited  to  actual  val- 
ues will  gain  faster  than  those  values  can  be  produced  by 
labor,  and  it  cannot  be  successfully  disputed,  how  much  more 
rapidly  will  its  periodical  ruin  and  desolation  overtake  us  if 
to  the  actual  values  are  added  enormous  sums  of  fictitious 
values  which  are  to  draw  interest  also? 

116  The  lack  of  good  sense  that  is  displayed  by  the  jdco- 
ple  generally  in  dealing  with  these  questions  is  something 
marvelous;  but  their  acquiescense  in  the  prevailing  theory  of 
interest,  as  well  as  their  silence  on  the  impossibility  of  its 
continuance  on  the  part  of  the  professors  of  the  "science"  of 
political  economy,  and  the  popular  and  so-called  "great  finan- 
ciers," is  beyond  comprehension,  and  can  only  be  accounted 
for  on  the  ground  of  ignorance  on  the  subject.  It  was 
pointed  out  in  "The  Financial  Problem"  that  millionaires, 
failures  and  poverty  are  the  natural  outcome  of  interest  tak- 
ing, concluding  with  the  following  paragraph: 

1 17  "Let  me  still  further  reinforce  this  idea  by  stating  it 
in  another  way.  The  present  social  system  may  be  said  to 
be  strangling  itself  to  death.  The  annual  interest  charge 
exceeding  the  net  annual  increase  in  labor  products;  or,  in 
other  words,  labor  produced  more  wealth  during  the  year 
than  is  actually  consumed  and  there  remains  a  surplus,  but 
this  surplus  is  not  sutHcient  to  meet  the  amount  of  interest 
demanded  by  the  capitalists  for  the  use  of  their  capital ;  hence, 
as  I  have  already  stated,  failures  are  inseparable  from  the 
system." 

iiS  And  now  comes  Mr.  J.  W.  Bennett,  of  St.  Louis, 
who,  in  the  March,  1S94,  number  of  the  "Arena,"  in  the 
most  powerful  article  ever  published  in  a  magazine  on  that 
subject,  demonstrates  in  a  conclusive  and  unanswerable  man- 
ner the  truth  of  the  above  statement,  showing  the  real  mon- 


6o  THE    NEW    PHILOSOPHY    OF    MONEY 

etary  condition,  not  only  of  this  country,  but  of  the  entire 
civilized  world.  Mr.  Bennett  gives  an  estimate  of  the  total 
wealth  in  the  United  States,  its  distribution  and  the  j^ropor- 
tion  that  bears  interest.     He  says: 

119  "An  odd  projDosition,  but  one  capable  of  mathemati- 
cal demonstration,  is  that  the  very  foundation  principles  of 
our  industrial  system  lead  us  to  recognize  obligations  which 
we  can  never  pay.  A  simple,  specific  statement  of  what 
they  are,  compels  us  to  admit  that  they  are  too  large  to  meet. 
The  present  wealth  of  the  United  States  may  be  placed  in 
round  numbers  at  $73,000,000,000.  That  fully  So  per  cent 
of  this  sum  pays  interest  nvdy  be  verified  by  any  person  who 
cares  to  give  the  subject  thought.  If  any  of  the  money 
invested  in  business  bears  interest,  all  money  invested  in  bus- 
iness must  likewise  bear  interest,  otherwise  nobody  would 
assume  business  risks.  But  we  may  arrive  at  the  same  con- 
clusion by  a  process  quite  different. 

120  "Something  like  So  per  cent  of  the  wealth  of  the 
country  is  in  the  hands  of  about  350,000  persons,  or  about 
one  two-hundred-fortieth  of  the  population.  This  excludes 
the  wealth  of  well-to-do  farmers  and  merchants;  and  it  goes 
without  saying  that  nine-tenths  of  this  wealth  held  by  the 
immensely  rich  is  interest-bearing.  Nearly  all  of  it  is  lent, 
or,  if  not  lent  out  it  is  invested  in  some  business  where  inter- 
est on  the  money  invested  is  added  to  the  return  or  profits  of 
the  undertakers. 

121  "The  wealth  in  the  hands  of  farmers  and  merchants 
is  paying  interest  on  all  that  is  not  used  for  the  personal 
wants  of  themselves  and  their  families;  and  even  many  of 
the  homesteads  of  the  country  are  paying  interest.  At  least 
one-half  of  such  wealth  is  interest-bearing.  An  examination 
of  the  mortgage  lists  of  the  several  states  will  more  than  bear 
out  this  estimate.  We  are,  then,  paying  fixed  charges,  as  the 
railroads  put  it,  on  about  $55,000,000,000  of  the  country's 
wealth.  The  net  rate  will  average  5  per  cent;  and  taking 
into  consideration  commissions  and  other  charges,  6  per  cent 
is  a  low  estimate  of  the  gross  rate.  The  interest  on  $55,000,- 
000,000  at  6  per  cent  is  $3,300,000,000  per  year.  To  get  the 
average  interest  charges  for  the  last  decade,  we  must  take 
the  average  of  interest-paying  capital,  which  is  about  $50,- 
000,000,000.     We  have,  then,  an  average  A-early  interest  of 

$3,000,000,000,  a  sum  which  more  than  absorbs  the  entire 


USURY INEUKST  6l 

yearly  increase  of  wealth  in  the  United  States.  During  the 
last  decade,  tlie  wealth  of  this  country  has  increased  about 
$22,000,000,000.  During-  the  same  period  the  interest 
charges  were  $30,000,000,000.  Adding  but  the  single  item 
of  interest  on  personal  business  obligations  to  the  standing 
debt  of  the  people,  the  assets  of  the  country's  citizens  will, 
in  the  short  period  of  ten  years  fall  $8,000,000,000   below 

their  liabilities 

132  "But  interest  and  rent  charges  are  not  the  only  lia- 
bilities of  the  business  of  the  country.  The  government 
must  be  supported ;  the  national  debt  and  the  interest  thereon 
must  be  met;  debts,  state,  municipal  and  school  must  be  pro- 
vided for;  local  govermnent  must  be  maintained.  The  inter- 
est on  the  public  debt  of  the  United  States  amounts  to  $40,- 
410,000  annually.  The  interest  on  municipal,  county  and 
township  debts  in  the  United  States  is  $56,750,000  per  year. 
The  expenses  of  the  United  States,  exclusive  of  interest  and 
the  paying  off  of  the  standing  indebtedness,  are  now  about 
$350,000,000  }earlv,  and  the  cost  of  state,  county  and  munic- 
ipal government  is  $450,000,000  per  year.  At  the  very  low- 
est estimate,  $897,000,000  must  be  charged  yearly  to  govern- 
ment in  the  United  States,  not  includmg  the  payment  of  the 
principal  of  the  public  debt.  Tliis,  representmg  money  spent 
outside  of  regular  business,  amounts  to  $8,970,000,000  in  a 
decade.  Addmg  it  to  the  former  sum,  the  excess  of  interest 
on  private  obligations  over  the  increase  of  wealth,  we  have 
$16,970,000,000  as  the  sum  which  the  assets  of  the  citizens 
of  the  United  States  fall  behind  their  mdebtedness  every  ten 
years.  In  view  of  such  figures  as  tliese,  it  is  not  difficult  to 
see  Avhy  we  have  periods  of  business  depression  every  ten 
years  and  terrible  financial  panics  every  twenty  years. 

123  '^The  tendency  under  such  conditions  is  to  have  all 
the  wealth  which  is  not  used  to  feed  and  shelter  and  clothe 
the  race  pass  into  the  hands  of  the  money-lender.  There  is 
a  comparatively  trifling  exception  to  the  rule.  About  five 
per  cent  of  all  who  start  in  business  leave  it  with  more  than 
they  began  with,  and  but  a  portion  of  their  gains  can  be 
charged  to  interest.  The  more  stable  and  the  largest  houses 
of  business,  however,  realize  large  returns  from  interest 
taking. 

124  "What  wonder  is  it,  then,  that  the  business  of  the 
countrv  has  to  go  periodically  into  the  hands  of  a  receiver,  in 
order  to  strai<rhten  out  its  accounts   and  begin  anew  ?     This 


62  THE    NEW    PiriLOSOPHV    OF    MONEY 

is  the  only  way  in  which  the  great  bulk  of  business  men  can 
get  a  new  start.  Creditors  are  obliged  to  take  part  of  their 
claims,  as  there  is  not  enough  to  pay  the  whole.  Debts  are 
canceled  and  a  new  start  is  made.  The  wealth  is  lent  out 
again;  interest  is  paid  again  until  the  burden  gets  too  large 
and  another  crash  comes.  At  each  crash  some  of  the  men 
who  were  creditors  at  the  last  accounting  are  found  among 
the  debtor  class,  and  thus  property  is  prevented  from  mass- 
ing in  a  decade  or  two  in  the  hands  of  a  permanent  creditor 
caste.     Yet  the  circle  is  forever  growing  narrower. 

1 35  "After  keeping  up  the  capital  stock  of  the  world,  and 
feeding,  sheltering  and  clothing  the  race,  there  is  not  enough 
left  to  satisfy  the  demands  of  the  money-lender.  If  one 
agrees  to  return  every  ten,  twelve,  or  even  twenty  years,  an 
amount  equal  to  that  which  he  has  borrowed,  in  interest,  he 
is  undertaking  an  impossibility.  Nature  has  no  such  pro- 
ductive power.  If  it  cannot  be  done  in  this  country  of  virgin 
resources  and  unparalleled  conditions  for  the  production  of 
wealth,  it  can  be  done  nowhere.  We  are,  then,  confronted 
by  a  foundation  principle  of  our  financial  system  which 
necessarily  results  in  business  panic.  It  is  necessary  that  this 
principle  of  our  system  be  critically  examined  if  we  would 
find  where  our  trouble  lies 

126  "If  interest  taking  is  right,  compound  interest  taking 
is  right.  The  principle  of  compound  interest  is  that  a  dollar, 
without  any  exertion  on  the  owner's  part,  will  grow  into  two 
dollars  in  a  given  number  of  years,  four  dollars  in  less  than 
twice  that  time,  eight  dollars  in  less  than  three  times  the 
original  period,  and  will  keep  on  increasing  in  more  than 
geometrical  ratio,  until  that  one  dollar  with  its  interest  would, 
after  a  time,  represent  all  of  the  wealth  on  earth  (130).  The 
rate  makes  no  difference  as  to  the  principle  of  the  thing. 
Money  at  compound  interest  will  just  as  truly  increase  indefi- 
nitelv  at  5  as  at  25  per  cent,  though  more  slowly,  to  be 
sure." 

137  But  Mr.  Bennett's  article  is  replete  with  fact  and 
sound  logic,  annihilating  the  sophistry  of  the  political  econo- 
mists and  "great  financiers"  at  every  turn. 

128  There  are  two  points,  however,  where  Mr.  Bennett 
differs  with  The  New  Philosophy  of  Money.  On  page  518 
he  says:     "Interest  taking  is  the  foundation    of  speculative 


USUUV INTEREST  63 

business."  *  The  fact  is  that  interest  and  speculation  are 
both  made  possible  by  the  establishment  of  a  false  money  sys- 
tem, the  object  of  which  is  to  make  money  scarce  by  restrict- 
ing it  within  an  artiHcial  limit  instead  of  allowing  it  its  nat- 
inal  limit,  as  the  IMiitual  Credit  System  jDrojDOses — the  issue 
of  secured  credit  in  the  form  of  certificates  of  credit  (pajoer 
money),  not  on  some  special  commodity  of  value,  but  on  any 
and  all  commodities  of  value. 

129  Such  a  volume  of  money  as  would  result  with  this 
system  would  destroy  sj)eculation,  because  everyone  would 
have  an  equal  opportunity;  while  the  mutual  feature  of  the 
system  would  destroy  interest  (36-39).  Interest,  therefore, 
is  not  the  origin  of  speculation,  but  both  interest  and  specu- 
lation are  the  result  of  a  monopoly  of  money. 

130  In  the  following  startling  proposition,  interest  is 
calculated  at  the  rate  of  6  per  cent:  "Supjoose  one  cent  had 
been  put  at  interest  at  the  commencement  of  the  Christian 
era,  what  would  it  have  amounted  to  at  simple,  and  what  at 
compound  interest,  at  the  end  of  the  vear  1S27'' 

Answer  : 

Simple,  $i,iS6.20 
Compound, 

$172,616,474,047,552,529,470J60,914,974J11,959,976,620,354..56 

nearly — a  sum  greater  than  could  be  contained  in  six  millions 
of  globes,  each  equal  to  our  earth  in  magnitude  and  all  of 
solid  gold." — Roswell  C.  SmitJi's  Arifh?netic^  1^37- 


*The  other  point  referred  to  will  be  found  in  paragraphs  315,  31S. 


"WE  MUST  HAVE  GOVERNMENT." 

131  Such  a  statement  never  came  fi^om  a  philosophical 
reasoner.  It  is  manifestly  ahsurd  to  say  "we  must  have"  of 
anything  except  those  things  that  are  indispesable  to  life, 
such  as  air,  w^ater,  food,  etc.  Man's  mode  of  life,  his  institu- 
tions, the  means  of  satisfying  his  wants,  and  even  the  wants 
themselves,  are  ever  changing.  Those  who  have  experi- 
mented in  hygienic  living  know  how  superfluous  nre  some  of 
the  "wants"  it  was  their  custom  religiously  to  satisfy;  and 
those  who  have  become  evolutionists  realize  how  far  man  is 
from  knowing  what  he  really  does  want  (need).  Poor  little 
pigmy!  But  a  speck  in  the  iniiverse,  tossed  about  on  the 
great  ocean  of  life;  the  sport  of  forces  he  does  not  compre- 
hend; the  victim  of  his  own  ignorance;  this  manikin,  who 
boasts  of  a  history,  the  philosophy  of  which  he  has  yet  to 
decipher;  whose  efforts  at  justice  are  a  mockery;  whose 
dominant  propensity  is  free  booty,  and  whose  basis  of  ethics 
is,  "heads,  I  win;  tails,  you  lose";  this  embodiment  of  hypoc- 
risy and  fraud;  this  Philistine,  is  presumptuous  enough  not 
only  to  have  an  opinion  regarding  morals,  how  we  shall 
exchange  commodities,  which  commodities  are  good  for  us 
and  which  are  not;  but  this  ignoramus  has  the  audacity  to 
incorporate  his  opinions  into  statutes  and  enforce  them  upon 
his  unwilling  fellow-beings.  How  does  he  know  that  he  is 
right?  There  is  no  moi'e  certain  indication  of  ignorance  than 
the  constant  and  persistent  effort  to  enforce  an  opinion.  To 
doubt  is  the  very  beginning  of  wisdom.  If  such  people 
would  only  doubt  as  to  the  wisdom  of  the  course  they  pur- 
sue, it  would  be  an  indication  that  they  realize  that  possibly 
they  might  be  wrong;  but  this  is  foreign  to  their  nature. 
Thei.r  anxiety  does  not  run  in  that  direction.     Their  egotism 


WE    MUST    ]IA\'K    (;0\'KUNMENT  65 

is  ever  rapaciously  hankering  for  the  exercise  of  authority. 
A  little  doubt  as  to  the  right  to  make  the  laws  that  have  since 
been  repealed,  might  have  saved  the  cost  of  making  and 
rcpeahng  them,  the  humiliation  and  ridicule  they  subjected 
us  to,  and  the  misery  and  injustice  their  enforcement  entailed. 
These  are  the  penalties,  the  burdens,  that  ignorance  imposes 
on  us.  We  remonstrate,  and  the  only  answer  we  can  evoke 
is:  "We  must  have  government."  A  thesis  of  democracy 
is:  "That  government  is  best  which  governs  least."  This 
is  proved  to  be  true  by  the  fact  that  the  more  government, 
the  worse  we  are  off.     Laws  multiply,  and  so  does  crime. 

133  It  may  be  hard  for  some  people  to  realize  that  a  very 
large  part  of  mankind  are  Philistines,  a  soi't  of  legal  or  con- 
ventional foot-pads,  of  whom  we  must  be  ever  w^atchful  in 
order  that  we  may  not  be  victimized  in  some  way  that  we 
least  expect.  But  what  else  do  the  records  of  the  courts,  if 
not  our  own  immediate  experience,  teach  us?  Not  only  are 
we  forever  witnessing  those  acts  that  come  under  the  cate- 
gory of  crimes,  but  we  are  daily  surprised  by  little  acts  of 
vantage  which  tell  too  plainly  the  motive.  Such  wide-spread 
cupidity!  Cupidity  that  is  alert  on  all  occasions,  and  in 
every  sphere  of  life;  that  stoops  to  all  devices;  that  knows 
no  bounds  and  will  take  any  chances;  is  a  sad  commentary 
on  the  claims  of  paternalists  and  altruistic  moralists. 

133  One  would  naturally  conclude  that  such  results  would 
induce  inquiry  into  other  methods  of  dealing  with  evils  for 
which  government  is  suj^posed  to  be  a  remedv,  but  of  which 
it  is  an  aggravation,  and  that  those  who  suffer  the  most  from 
these  evils  would  be  only  too  glad  to  examine  any  method 
that  promised  relief ;  but  in  spite  of  the  admitted  theory — 
that  government  is  best  which  governs  least, — the  records  of 
the  past,  and  our  own  immediate  experience,  the  superstition 
"we  must  have  government"  still  dominates  the  minds  of  the 
masses,  and  appeals  to  reason  are  disregarded.  In  vain  it  is 
asked:  Where  is  the  history  of  the  government  that  has 
ceased  to  be  that  was  not  tyrannical.^  Where  is  the  govern- 
5 


66  THE    NEW    PHILOSOPHY    OF    MONEY 

ment  that  has  endured  that  is  not  despotic?*  "What  is  over- 
taking us  here  at  the  present  time?  Precisely  what  has  over- 
taken all  nations — centralization  of  power,  always  accompan- 
ied with  increase  of  corruption,  demoralization  and  revolution. 
All  this  must  have  some  rational  explanation.  It  is  an  axiom, 
I  think  nowhere  disputed,  that  there  is  no  effect  without 
adequate  cause.  To  what  cause,  then,  shall  we  ascribe  these 
results?  No  sooner  does  an  individual  undertake  an  earnest 
study  of  these  questions  than  he  becomes  a  deserter;  and 
while  he  may  not  go  forth  and  proclaim  his  change  of  front, 
he  ceases  to  co-operate,  as  formerly,  with  the  enemies  of  lib- 
erty. "What  has  taken  place?  Whence  the  change  he  has 
undergone?  He  has  become  enlightened.  He  has  informed 
himself;  whereas  before  he  was  ignorant.  Is  it  not  true, 
also,  that  those  who  are  the  most  zealous  in  maintaining  the 
present  order  of  things  and  the  most  persistent  opponents  of 
a  change,  have  never  made  a  conscientious  study  of  the  sub- 
ject? They  have  merely  taken  it  for  granted  that  "we  must 
have  government,"  and,  therefore,  what  the  government 
ordains  must  be  right. 

134  Now,  is  it  not  natural  to  suppose  that  the  same 
result  would  follow  in  at  least  a  large  majority  of  cases,  that, 
as  stated,  has  occurred  in  all  those  who  have  made  a  consci- 
entious study  of  this  subject  ?  And  would  not  such  results 
work  a  complete  change  in  our  social  institutions?  Have  we 
not,  then,  an  answer  to  the  question:  "To  what  cause  shall 
we  ascribe  these  results?"  What  else  but  prevailing  igno- 
rance? Additional  evidence  of  ignorance  is  manifested  in  the 
fear  entertained  by  those  who  have  never  made  a  study  of 
the  Anarchistic  philosophyf  as  expounded  by  P.  J.  Proud- 

*Those  who  have  not,  and  care  to  look  up  the  question,  are  re- 
ferred to  "A  Vindication  of  Natural  Society,"  by  Edmund  Burke; 
"History  of  Civilization  in  England,"  by  Thos.  Henry  Buckle;  "Intel- 
lectual Development  of  Europe,"  by  John  W.  Draper;  '-Social  Stat- 
ics," by  Herbert  Spencer. 

•j-" Anarchy — Want  of  government  in  a  state, — an  anarchy,  a  com- 
monwealth without  a  head  or  government." — Skeaf's  Etymological 
Dictionary  of  ilie  English  Language. 


WE    MUST    HAVE    (JOVERNMEXT  67 

hon*  and  others,-}*  that  it  means  the  jorevention  of  anything 
Hke  order  or  system ;  that  since  "government  is  to  preserve 
order,"  the  abolition  of  government  must  mean  the  inaugura- 
tion of  disorder.  All  this  misunderstanding  shows  that  Ihey 
are  ignorant  of  the  fact  that  government,  instead  of  being 
the  preserver  of  order  is  the  promoter  of  disorder.  This  has 
been  demonstrated  unanswerably  l:)y  these  authors.  Far 
from  ojoposing  system  and  order,  Anarchism  teaches  the  only 
true  way  to  have  a  permanently  peaceful  system  of  society; 
that  the  State  is  an  invader  of  personal  right,  and  that  order 
can  only  be  preserved  by  maintaining  personal  right — liberty. 
As  Spencer  has  so  clearly  pointed  out,  the  State — govern- 
ment— originated  in  brute  force;  and  as  Burke  so  eloquently 
shows,  has  perpetuated  itself  by  the  same  means.  He  says: 
"In  vain  you  tell  me  that  artificial  government  is  good,  but 


* "May  not  anarchy,  •which  is  a 

very  great  evil  become  a  very  great  good?  Such  is  the  question 
raised  by  a  celebrated  writer,  M  .  Proudhon,  and  he  did  not  hesitate  to 
answer  it  in  the  atlirmative.  If  we  understand  him  aright,  the  anar- 
chy of  M.  Proudhon  is  nothing  but  self  government  carried  to  its 
extreme  limits,  and  the  hist  step  in  the  progress  of  human  reason. 
According  to  him,  men  will  at  last  acknowledge  that,  instead  of  dis- 
puting and  fighting  over  questions  of  which,  in  the  majority  of 
cases,  they  know  nothing,  and  instead  of  seeking  to  ensLi\e  each 
other,  they  would  do  better  to  accept  the  law  of  labor  frankly  and 
join  hands  to  triumj^h  over  the  numerous  obstacles  which  nature 
opposes  to  their  well-being.  In  this  new  order  of  things,  nations 
would  be  nothing  more  than  groups  of  producers  bound  together  by 
close  ties  of  common  interest.  Politics,  as  hitherto  understood, 
would  have  no  further  raison  d'etre,  and  anarchy,  that  is  to  sav,  the 
disappearance  of  all  political  authority,  would  be  the  result  of  this 
transformation  of  human  society  in  which  all  questions  to  be  solved 
Avould  have  a  purely  economic  character.  Long  ago  J.  B.  Say  ad- 
vanced the  opinion  that  the  functions  of  the  State  should  be  reduced 
to  the  performance  of  police  duties.  If  so  reduced,  there  would  be 
but  one  step  needed  to  reach  the  an-archy  of  M.  Proudhon, — suppres- 
sion of  the  police  power." — /,.  Ponbert,  in  Cyclopedia  of  PoLituMt  Hci- 
ence,  edited  by  'John  J.  Lalor,  iS8j. 

f'-What  is  Property"  and  "The  Philosophy  of  Misery,"  by  P.  J. 
Proudhon;  "True  Civilization,"  by  Josiah  Warren;  "Science  of  Soci- 
ety," by  Stephen  Pearl  Andrews;  "Yours  or  Mine"  and  "Hard  Cash," 
by  E.  \\.  Hey  wood;  "Instead  of  a  Book,"  by  Benj.  R.  Tucker,  and 
his  fortnightly  paper,  "Liberty";  and  "The  Anarchists,"  by  John 
Henry  Mackay. 


68  THE    NEW    PJIILOSOPHY    OF    MONEY 

that  I  fall  out  only  with  the  abuse.     The  thing;  i/ze  thing 
itself  is  the  abuse!" 

1 35  To  sa}^  that  these  authors  who  have  made  the  most 
critical  analysis  of  all  the  factors  that  figure  in  our  social  rela- 
tions; these  men  of  keen  intellect,  who  have  shown  up  the 
errors  and  fallacies  of  the  abettors  of  the  methods  of  force, 
demonstrating  that  the  recognition  of  the  right  of  the  indi- 
vidual to  his  person  and  property  is  the  fundamental  principle 
upon  which  a  rational  system  of  society  must  rest;  these 
philosophers  whose  works  have  been  ignored  and  excluded 
from  the  libraries  in  the  vain  hope  of  patching  up  and  per- 
petuating that  relic  of  the  barbarous  past,  that  despoiler  of 
all  that  is  good  and  noble  in  the  race ;  that  institution  that  is 
barren  of  any  good  whatever;  the  parent  of  all  evil,  the  sum 
of  all  villainies — the  State, — to  say  that  these  men  want  dis- 
order; that  they  have  no  regard  for  private  property  and  that 
what  they  aim  at  is  a  chaotic  condition  in  which  there  will  be 
no  security  to  person  or  property,  is  the  most  inexcusable  per- 
version of  fact.  From  the  right  of  the  individual  to  his  (or 
her)  person  and  property,  they  argue  the  denial  of  the  right 
of  government  to  impose  taxes,  because  it  is  the  antithesis  of 
the  right  to  private  property.  Either  the  individual  has  a 
right  to  his  property  or  he  has  not.  If  he  has  a  right  to  his 
property,  then,  no  one,  not  even  government,  can  take  it 
without  his  consent.  It  cannot  take  all  of  it,  nor  even  a  frac- 
tion of  it;  for  a  fraction  of  it  is  as  much  his  as  the  whole  of 
it  is,  and  to  take  a  fraction  of  it  without  his  consent  is  as 
much  a  violation  of  the  principle  of  right  as  to  take  the 
whole.  This  principle  is  so  well  recognized  even  in  law,  that 
anyone  caught  appropriating  the  property  of  another,  how- 
ever insignificant  its  value,  is  dealt  with  as  having  violated 
the  right  of  private  property. 

136  Only  government,  within  certain  limits,  can  take 
property  without  the  consent  of  the  owner,  with  impunity. 
When  it  exceeds  the  limit,  the  people  resist,  even  by  the  use 
of  fiorce  if  necessary.     This  in  itself  constitutes  a  denial  of 


WE    MUST    HAVE    GOVERNMENT  69 

the  "right"  of  government,  and  shows  that  the  people  con- 
sent to  he  robhed  up  to  a  certain  extent,  because  they  do  not 
know  what  else  to  do.  Here  again  is  more  evidence  of  pop- 
ular ignorance.  Upon  this  same  principle  of  right, — the 
right  of  the  individual  to  his  person— is  based  the  denial  of 
the  "right"  of  government  to  call  upon  the  individual  to  bear 
arms  against  his  consent.  If  the  individual  has  the  right  to 
his  person,  he  has  the  right  at  any  and  all  times  and  under  all 
circumstances,  to  decide  whether  he  \\  ill  bear  arms  or  not. 
For  if  he  has  not  the  right  to  refuse  to  bear  arms,  then  he 
has  not  the  right  exclusively  and  absolutely  to  his  person. 

137  Having  determined  that  these  two  constitute  the 
fundamental  principles  in  social  science,  these  philosophers 
affirm  with  unfaltering  assurance  that  the  most  desirable  and 
satisfactory  state  of  society  can  be  attained  only  through  their 
recognition  and  absolute  inviolability;  that  such  must  neces- 
sarily be  the  result,  and  they  proceed  to  demonstrate  that  it 
would  be  the  result. 

138  Instead,  therefore,  of  those  who  advocate  the  aboli- 
tion of  the  State  desiring  a  state  of  disorder,  they  prove  that 
it  is  the  only  possible  way  of  attaining  an  orderly  state  of 
society,  and  that  the  existence  of  the  State  is  the  main  hin- 
drance to  its  realization.  That  the  statement,  "v/e  must  have 
government"  should  be    changed    to:    we    must    abolish 

GOVERNMENT. 

139  But  to  the  average  man  or  woman,  "we  must  abolish 
government"  is  a  scarecrow,  a  bugaboo  of  more  hideous 
proportions,  if  possible,  than  that  sublime  myth,  the  prince  of 
devils.  What  are  they  scared  at?  In  the  first  place,  there  is 
no  hope  that  government  will  be  abolished  so  long  as  people 
are  ignorant  of  the  fact  that  it  is  the  cause,  the  originator  of 
all  their  woes.  It  is  perpetuated  through  ignorance;  audit 
fosters  ignorance,  just  as  the  church  does,  in  order  that  it 
may  perpetuate  itself.  The  abolition  of  government,  of  the 
State,  is  an  impossibility,  except  as  it  outgrows  its  "useful- 
ness"; except  as  other  institutions  come  forward  and  do  the 


yO  THE    NEW    PHILOSOPHY    OF    MONEY 

work  that  it  makes  a  pretense  of  doing,  and  the  people  real- 
ize it.  The  abolition  of  government,  therefore,  should  not 
be  feared  as  an  evil.  Even  those  who,  from  lack  of  infor- 
mation on  the  subject  regard  the  existence  of  the  State  as 
necessary,  will  consent  to  its  abolition  when  there  shall  be  no 
further  use  for  it.  Will  anyone  insist  on  having  policemen 
patroling  the  streets  long  after  arrests  shall  have  ceased  and 
invasions  of  persons  and  property  shall  be  a  thing  of  the 
past?  If  that  time  never  comes,  then  the  policeman  will  not 
be  abolished  and  there  is  nothing  to  fear. 

140  The  thesis  of  the  abolition  of  the  State  is  this:  See- 
ing that  government  is  an  evil,  a  mistake,  that  it  does  not  do 
what  it  promises  to  do;  that  it  is  an  aggravation  of  the  dis- 
orders for  which  it  is  supposed  to  be  a  remedy;  that  it  does 
not  and  cannot  promote  order  and  justice,  but  is  itself  a  most 
effectual  hindrance  to  their  establishment;  let  us  institute  such 
other  means  as  will  in  reality  bring  about  justice  and  order  in 
society;  that,  since  government  never  did,  does  not,  and,  in 
the  nature  of  things,  cannot,  let  us  organize  and  put  into 
operation  that  which  can  and  will  accomplish  the  ends  we 
desire.  Such  is  the  philosojDhy  that  is  designated  Anar- 
chism ;  the  best  definition  of  which  is,  perhaps,  the  absolute 
inviolability  of  person  and  property. 

141  It  may  be  well  here  to  p^int  out  the  difference 
between  the  Anarchist  and  the  bomb  thrower.  No  worse 
than  government  itself,  which  uses  dynamite  and  gatling 
guns,  he  is  a  deluded  victim ;  nevertheless,  a  product  of  the 
very  society  that  condemns  him,  and  being  stronger  than  he, 
survives  while  he  perishes.  Pliilosophical  Anarchism  con- 
demns the  method — force.*     It  is  contrary  to  the  definition, 


*The  Standard  Dictionary's  definition  of  Anarchism  is :  "The  prin- 
ciples, practices,  or  characteristic  spirit  of  Anarchists;  the  theory 
that  all  forms  of  government  are  wrong  and  unnecessary."  The  Cen- 
tury Dictionary  says:  "Anaixhy — Specifically — 2.  A  social  theory 
which  regards  the  union  of  order  and  the  absence  of  all  direct  gov- 
ernment of  man  by  man  as  the  political  ideal;  absolute  individual 
liberty." 


WE    MUST    HA\I-:    t;0\-I-:KNME.\T  J  I 

"the  absolute  inviolability  of  person  and  property,"  and  impo- 
litic: it  can  accomplish  no  good  unless  it  is  to  give  the 
unphilosophical  wa'iters  of  the  press  something  to  say  and 
startle  lazy  plutocrats  out  of  their  dream  of  security,  w^hile 
conditions  are  as  diabolical  as  they  well  can  be. 

142  But,  it  is  asked,  what  do  you  propose  to  substitute? 
The  idea  is  well  nigh  universal  with  the  philosophical  reform- 
ers that  the  first  step  towards  a  new  and  peaceful  order  of 
society  is  necessarily  a  release  from  the  grip  of  the  money 
power.  This  can  be  accomplished  by  taking  the  control  of 
money  entirely  out  of  the  hands  of  government.*     The  idea 


*"The  right  of  the  individual  to  do  as  he  pleases  with  his  own  is 
an  axiom  with  us.  Trespass  alone  limits  this  right,  and  provided  one 
does  not  trespass,  one  may,  by  competition  or  otherwise,  ruin  one's 
neighbor.  But  notwithstanding  our  axiom,  and  notwithstanding  we 
place  little  restriction  upon  this  right,  there  is  one  thing  individual 
may  not,  wiisi  tiut,  do.  One  may  fieely  fashion  one's  gold  and  silver 
into  ring,  watch,  spoon,  etc.,  and  pass  or  sell  at  alleged  weight  and 
fineness,  but  one  may  not,  tnust  not,  without  crime,  fashion  into  coin 
and  pass  or  sell  at  alleged  weight  or  fineness;  and  one  mav  also 
freely  issue  and  sell  time  promises  to  pay,  but  one  may  not,  must  7wt, 
without  crime,  issue  and  circulate  demand  promises  to  pav. 

"Slightest  thought  should  show  the  injustice  and  absurdity,  and 
therefore  injury  of  such  prohibition;  but  as  some  cannot  think,  and 
many  will  not  think,  these  perceive  neither  the  injury,  injustice  nor 
absurdity  ;  and  as  the  few  who  do  think  qualify  their  perceptions  with 
so  many  imaginary  and  impossible  fears,  they  might  as  well  not 
think.  Hence,  all  unite  in  preventing  individual  doing  as  he  pleases 
with  his  own,  respecting  coining  money  and  issuing  circulating 
promises  to  pay.  All  fear  to  permit  right  and  leave  consequences  to 
righteous  Nature,  lest  Naturestultify  herself  and  bring  evil  out  of  good. 

"To  prevent  right  is  to  commit  wrong.  Now,  what  is  government 
that  it  can  righteously  prevent  one  doing  as  one  pleases  with  one's 
bullion  and  putting  one's  property  into  such  shapes  as  one  pleases.^* 
Government  is  not,  as  generally  supposed,  a  mysterious,  omnipotent 
creature,  whose  simple  fiat  makes  right  and  wrong,  but  is  merely  an 
aggregate  or  collective  individual.  Aggregation  of  individuals  into 
government  does  not  itnpart  to  the  aggregate  a  different  nature  from 
its  component  units,  nor  rights  different  in  kind,  however  in  degree, 
frotn  said  units  — no  more  than  aggregation  of  seeds  of  wheat  until 
they  fill  an  elevator  changes  the  nature  of  the  grain.  Government 
differs  from  the  individual  only  as  the  grains  from  the  mass — that  is 
in  degree,  not  in  nature.  Now,  as  righteous  individual  cannot  arbi- 
trarily prevent  individual  doing  as  he  pleases  with  his  own,  so  nei- 
ther can  the  aggregate  individual,  or  government,  righteously  pre- 
vent its  individual  units." — '■'■Ris^ht  of  Individual  to  Coin  Money  and 
Issue  IVotcs,"  by  Lewis  H.  Blair. 


y3  THE    NEW    PHILOSOPHY    OF    MONEY 

of  the  necessity  for  government  supervision  and  regulation  of 
money,  as  tlie  "Galveston  News"  puts  it,  "was  borrowed 
from  the  previous  royal  system."  Royalty,  wherever  it  has 
existed,  has  availed  itself  of  the  opportunity  which  ignorance 
on  this  subject  afforded,  and  arrogated  to  itself  the  right  to 
provide  and  regulate  the  supply  of  money.  But  invasion  of 
personal  liberty  in  many  other  instances  has  been  regarded  as 
unwarranted  interference;  and  in  the  establishment  of  govern- 
ment in  this  countr}',  and  since,  much  discussion  has  taken 
place  as  to  the  proper  sphere  of  government.  Why  has  this 
phase  of  the  question  escaped  the  careful  examination  it 
deserves?  Why  is  it  that  the  popular  writers  and  the  press 
generally  take  it  for  granted  that  it  is  a  proper  function  of 
government  to  dictate  what  shall  be  used  as  a  medium  of 
exchange?  It  implies  a  belief  not  only  in  the  wisdom,  but  in 
the  honesty  of  lawmakers  that  is  at  variance  with  all 
experience.* 

143  The  history  of  the  world  is  a  history  of  corruption. 
Listen  to  Tom  Moore:  "All  the  governments  that  I  see  or 
know  are  a  conspiracy  of  the  rich,  who,  on  pretense  of  manag- 
ing the  public  only  pursue  their  private  ends,  devise  ways 
and  means  to  preserve  all  that  they  have  so  ill  acquired;  then 
to  engage  the  poor  to  toil  for  them  at  as  low  rates  as  possible 
and  oppress  them  as  much  as  they  please." — Tom  Moore's 
Utopia. 

"Like  loaded  dice  by  ministers  are  thrown, 

And  each  new  set  of  sharpers  cog  their  own; 
Hence  the  rich  oil  that  from  the  Treasury  steals, 

Drips  smooth  o'er  all  the  Constitution's  wheels, 
Giving  the  old  machine  such  pliant  play 

That  Courts  and  Commons  jog  one  joltless  way, 
While  Wisdom  trembles  for  the  crazy  car, 

So  gilt,  so  rotton,  carrying  fools  so  far; 


*The  reader  is  recommended  to  read  "Seven  Financial  Conspira- 
cies," by  Mrs.  S.  E.  V.  Emery. 


AVE    MUST    1IA\E    GO\'ER.MKNT  73 

And  the  duped  people,  hourly  doomed  to  pay 
The  sums  that  hrihe  their  liberties  away, — 

Like  the  young  eagle,  who  has  lent  his  plume 

To  fledge  the  shaft  by  which  he  meets  his  doom, — 

See  their  own  feathers  plucked  to  wing  the  dart 
Which  rank  corruption  destines  for  their  heart." 

— From  Tom  Moore's  Poem  on  Corruption. 


THE    ALLIANCE    AXD    PROIIIHITOR Y    FIXAXCIAL    LAW. 

\I-'ruiii  (he  Gah'esion  A'ezvs^ 

144  The  Alliance  is  an  offspring  of  certain  oppressive 
conditions,  and  the  Alliance  will  sooner  appreciate  the  truth 
of  what  the  Ne-ws  has  been  saying  regarding  repressive,  pro- 
hibitory paternalism  than  will  certain  benevolent  gentlemen 
in  the  old  parties,  who  are  paternal  in  their  solicitude  to  pre- 
vent the  people  from  hurting  themselves  in  and  by  economic 
liberty.  It  is  not  likely  that  the  Alliance  would  ever  have 
gone  to  the  government  for  issues  of  currency  if  the  govern- 
ment had  left  banking  business  as  free  as  the  boot-making 
and  grocery  business.  The  people  either  know  how  much 
credit  and  currency  they  need  or  they  are  not  competent  to 
manage  their  own  business  affairs.  Prohibitory  paternalism 
envelops  everything  in  such  a  cloud  that  gentlemen  like 
Senator  Reagan  are  astonished  to  hear  that  which  they  never 
suspected — that  they  are  paternalists,  as  proved  by  the  test  of 
what  they  desire  to  forbid.  At  least  if  they  are  willing  to 
have  bankers,  and  farmers  and  other  producers  come  together 
and  arrange  for  the  issue  of  all  the  secured  currency  which 
property  owners  desire  to  have  manufactured  and  to  pay  for 
in  a  free  market,  they  give  no  sign,  but  often  intimate  that 
the  property  owner  will  be  ruined  if  the  law  allows  him  to 
pledge  his  property  different  from  now.  How  bitter  a  satire 
to  the  Alliance  farmer  this  is!  He  is  free  to  borrow  monop- 
oly moncv  on  all  but  his  homestead,  and  pay  lo  per  cent. 
The  interest  may  eat  him  up.  He  learns  that  a  different  cur- 
rencv,  merely  representative  of  wealth,  can  be  made  and 
secured,  and  of  course  its  cost  is  nothing  like  the  interest 
which  currency  commands  as  now  known — a  mere  addendum 
to  monopoly  money.  The  borrower  being  an  owner  of 
wealth,  currency  to  render  that  wealth  fluid,  mobile,  is  what 


74  THE    NEW     PHILOSOPHY    OP'    MONEY 

he  needs,  and  the  proper  price  to  pay  is  what  it  costs  (97). 
No  better  taught,  he  looks  to  government  (305).  He  is  met 
even  by  Democrats  in  the  spirit  of  a  sincere,  ignorant, 
repressive  paternalism,  with  something  like  this:  "Dear 
boys,  you  would  pledge  your  property  and  overdo  the  thing; 
make  mistakes,  and  your  property  would  pass  into  other 
hands."  As  much  caution  and  advice  as  gentlemen  in  polit- 
ical life  like,  but  the  Alliance  is  right  as  to  all  but  the  gover- 
ment  being  the  warehouser  and  banker,  and  it  is  coming  to 
this,  that  the  Democratic  party  must  show  whether  it  is  in 
favor  of  liberty  in  finance.  The  owners  of  values  would 
have  long  ago  combined  to  supply  themselves  with  currency 
which  need  not  cost  more  than  1  per  cent  and  be  perfectly 
good,  but  prohibitory  law  stands  in  the  way.  The  Alliance 
has  come  to  demand  through  government  what  government 
has  wrongfully  forbidden  to  come  into  being  naturally. 
Wherever  government  strikes  down  trade  the  demand  will 
come  that  government  itself  do  the  thing  needed  if  it  will  not 
let  private  parties  do  it.  The  News  has  used  Senator  Rea- 
gan as  an  illustration,  but  its  criticism  applies  to  the  majority 
of  other  statesmen  who  consider  themselves  opposed  to 
paternalism.  It  tells  them  candidly  that  they  cannot  grapple 
with  the  Alliance  until  they  come  to  a  platform  of  economic 
liberty  on  the  currency  question  as  in  all  else.  It  is  a  neces- 
sary alternative.  The  people  will  have  currency,  and  will 
not  pay  for  it  a  rental  entirely  disproportioned  to  its  cost  of 
manufacture  and  control,  when  they  furnish  the  wealth  as 
security.  There  is  nothing  else  essentially  in  the  question, 
delicate  and  difficult  as  it  may  be,  than  security  and  manage- 
ment. What  the  Democrats  should  be  about  as  to  the  money 
question,  is  to  take  reason  of  the  Alliance  and  give  it  an  anti- 
paternal  form  and  issue.  Not  that  the  Alliance  might  at 
once  accept  free  banking.  Paternalism  has  brooded  and 
reigned  too  long  to  abdicate  at  once  from  the  minds  of  men. 
But  this  is  the  alternative,  and  the  only  alternative  (145-147). 

144a  The  foregoing  is  an  editorial,  and  the  Galveston 
Nezvs  is  the  ablest  and  most  influential  daily  paper  in  the 
state  of  Texas.  It  has  for  some  3'ears  past  been  an  advocate 
and  an  able  defender  of  freedom  in  the  supply  of  money 

145  Mr.  Lewis  H.  Blair,  in  his  very  able  essay,  "Standard 
of  Value,"  says:     "We  are  so  accustomed  to  the  regulative. 


WE    MUST    HAVE    GOVERNMENT 


75 


but  especially  restrictive,  IkiucI  of  government  in  things  mon- 
etary, we  can  scarcely  conceive  of  any  monetary  system  based 
on  liberty  and  competition.  Many  objections,  therefore,  will 
immediately  and  s]5ontaneously  arise  to  the  proposition  that 
government  must  absolutel}'  dissociate  itself  from  coinage  and 
currency.  The  chief  and  most  formidable  will  be  that  it  is 
the  duty  of  government  to  protect  the  citizens  against  bad 
money.  We  shall  examine  only  this  objection,  because  if 
this  is  found  baseless  all  other  objections  fall  with  it. 

146  "It  is  denied  that  it  is  the  duty  of  the  government  to 
protect  the  citizen  against  bad  money.  The  duty  of  the 
government  is  simply  to  protect  hmi  in  his  life,  lil)ertv  and 
pursuit  of  happiness.  In  all  other  respects — in  his  food,  rai- 
ment, shelter,  business,  religion,  etc. — he  is,  or  should  be,  left 
to  look  out  for  himself,  and  when  so  left  he  protects  himself 
better  than  government  can,  and  so  it  should  and  would  be 
with  money. 

147  "A  universal  currency  is  a  great  desideratum,  but 
such  currency  can  never  be  until  monetary  matters  are 
entirely  dissociated  from  government  and  left  to  the  free  play 
of  conflicting  interests.  When  thus  dissociated  and  left  to 
intelligent  self-interest,  not  a  generation  will  probably  pass 
before  the^great  financial  interests  of  civilization  will  have 
agreed  upon  a  universal  coinage,  varying  only  in  appearance 
and  nomenclature,  co-extensive  with  commerce.  A  universal 
currency  resting  upon  consent  and  not  arbitrary  statute  would 
only  be  an  extension  of  the  clearing-house  systems  of  Lon- 
don, New  York,  and  other  great  financial  centers.  These 
have  arisen  naturally  and  do  their  work  perfectly,  and  in  like 
manner  a  universal  currency  would  as  naturally  arise  and  do 
its  work  perfectly,  if  government  would  restrain  its  regu- 
lative hand." 

148  It  should  be  borne  in  mind  that  the  abolition  of  gov- 
ernment is  only  an  extension  of  that  degree  of  liberty  attained 
in  the  consummation  of  American  independence.  If  we 
rejoice  at  the  progress  thus  far  made  towards  human  liberty, 
why  should  we  deprecate  still  further  progress?  To  advo- 
cate the  abolition  of  government  is  simply  to  favor  such 
measures  as  will  bring  about  conditions  under  which  no  gov- 
ernment will  be  necessary.  Herbert  Spencer  says:  "It  is 
a  mistake  to  assume  that  government  must  necessarily  last 


76  THE    NEW    PHILOSOPHY    OF    MONEY 

forever.  The  institution  marks  a  certain  stage  of  civilization 
— is  natural  to  a  particular  phase  of  human  development.  It 
is  not  essential  but  incidental."*  Those  vv^ho  oppose  the  aboli- 
tion of  government  are,  logically,  in  favor  of  a  continuance  of 
crime  and  policemen  to  arrest  the  criminals.  The  choice  is 
between  prosperity  and  the  inviolability  of  person  and  prop- 
erty, or  poverty  and  the  policeman's  club;  and  our  opponents 
virtually  say,  "we  want  poverty  and  the  policeman's  club." 

149  The  story  of  him  whom  the  Christians  worship  can 
all  be  told  in  these  few  words:  In  a  certain  nation  there 
appeared  before  the  public  a  peaceful  and  inoffensive  citizen, 
who  said:  "I  can  show  you  how  you  can  all  become  happy." 
And  straightway  a  few  of  the  prominent  and  wealthy  men 
said  among  themselves:  "This  man  wants  to  overthrow  our 
institutions  that  we  have  reared;  let  us  hang  him."  And 
they  went  and  hung  him.  So  it  appears  to  be  now — not  a 
question  of  whether  we  would  be  happier  by  any  proposed 
change,  but,  is  it  likely  to  affect  our  institutions.  To  perpet- 
uate these  is  the  real  purpose  of  government,  while  progress 
is  constantly  demanding  their  abolition  as  things  we  have 
outgrown.  As  evidence  of  the  persistence  with  which  it 
inflicts  them  upon  the  people,  let  the  following  from  the 
Westminster  Review  testify.  And  let  the  reader  bear  in 
mind  while  perusing  this  history  of  money  panics  in  England, 
that  the  sublime  folly  that  caused  them  (the  monopoly  of  the 
Bank  of  England),  was  the  culmination  of  discussions  in 
which  participated  the  "wisest"  and  most  famous  men  of  the 
time.  Mr.  A.  J.  Warner,  in  his  statement  before  the  Com- 
mittee on  Banking  and  Currency,  December  14,  1S94,  said; 
"Probably  no  question  in  which  the  public  is  concerned  ever 
underwent  so  thorough  a  discussion  as  this  question  of  the 
regulation  of  currency,  not  only  in  this  country,  but  particu- 
larly in  Great  Britain  from  iSio  down  to  1857.  Every  phase 
of  the  question  was  discussed  over  and  over  again.      Parlia- 


*  "Social  Statics,"  page  24.     Edition  of  1S90. 


WE    MUST    HAVE    (;OVEKNMKXT 


77 


mentary  commission  after  commission  was  establislied  to  con- 
sider every  ^proposition  presented.  First  came  the  celebrated 
bullion  report  of  iSio,  then  the  report  of  the  secret  commis- 
sion of  1819,  then  the  commission  of  1S26,  that  of  1S40,  and 
finally  of  1S57,  in  which  was  summed  up,  in  my  judgment, 
the  wisdom  of  the  entire  discussion,  and  to  the  discussion  which 
then  took  place,  so  far  as  I  know,  nothing  really  has  been 
added  since  that  time.  I  believe  that  the  general  conclusions 
then  reached  have  been  accepted  by  all  writers  of  distinction 
from  that  day  down  to  this."  The  following  articles  are  a 
history  of  the  effects  produced  by  the  institution  approved  by 
these  "writers  of  distinction"  and  instituted  by  the  government. 


STATE  TAMPERING  WITH  MONEY  AND  BANKS. 

\^]Vcstminster  Revte-v,  yan.,  iSjS.'] 

150  When,  in  1793,  there  came  a  general  crash,  nxainly 
due  to  an  unsafe  banking  system  which  had  grown  up  in  the 
provinces  t'fz  conseq^ience  of  the  Bank  of  England  monopoly — 
when  the  pressure,  extending  to  London,  had  become  so  great 
as  to  alarm  the  bank  directors  and  cause  them  suddenly  to 
restrict  their  issues,  thereby  producing  a  frightful  multiplica- 
tion of  bankruptcies,  the  government  (to  mitigate  an  evil 
indirectly  produced  by  legislation)  determined  to  issue 
Exchequer  Bills  to  such  as  could  give  adequate  security. 
That  is,  they  allowed  hard-pressed  citizens  to  mortgage  their 
fixed  capital  for  an  equivalent  of  State  promises  to  pay  with 
which  to  liquidate  demands  on  them.  The  effect  was  magi- 
cal  In  1825  again,  when  the  bank  of  Eng- 
land, after  having  intensified  a  panic  by  extreme  restriction 
of  its  issues,  suddenly  changed  its  policy  and  in  four  davs 
advanced  5,000,000/  notes  on  all  sorts  of  securities,  the  panic 
at  once  ceased  (page  214).  And  now  mark  two  important 
truths;  one  of  them,  indeed,  already  indicated  in  the  forego- 
ing paragraph.  Observe,  in  the  first  place,  that  this  expan- 
sion of  paper  circulation  which  naturally  takes  place  in  times 
of  impoverishment  or  commercial  difficulty,  is  highly  salutarv. 
This  issuing  of  securities  for  future  payment  when  there  does 
not  exist  the  wherewith  for  immediate  payment  is  a  means  of 


78  THE    NEW    PHILOSOPHY    OF    MONEY 

mitigating  national  disasters  that  would  else  be  far  more  severe- 
In  a  few  words,  the  process  amounts  to  a  postponement  of 
trading  engagements  that  cannot  at  once  be  met.  And  the 
alternative  questions  to  be  asked  respecting  it  are, — shall  the 
merchants,  manufacturers,  shop-keepers,  etc.,  who,  by  unwise 
investments,  or  war,  or  famine,  or  great  lossess  abroad,  have 
been  in  part  deprived  of  the  means  of  meeting  the  claims 
upon  them,  be  allowed  to  mortgage  their  fixed  capital  to  a 
bank  in  return  for  promises  to  pay  of  equivalent  value?  or 
by  being  debarred  from  so  issuing  memoranda  of  claims  on 
their  fixed  capital,  shall  they  be  made  bankrupt?  On  the 
other  hand,  if,  as  they  must  also  be,  they  are  forthwith  made 
bankrupt,  carrying  with  them  others,  and  these,  again,  others, 
there  follows  in  the  first  place,  a  most  disastrous  loss  to  all 
creditors;  property  to  an  immense  amount  being  peremptor- 
ily sold  at  a  time  when  there  are  comparatively  few  able  to 
buy,  must  go  at  a  great  sacrifice 


FREE     TRADE     IN    BANKING. 
[IVeshninsfer  /Review,  ycin.,  iSS8.'\ 

151  It  has  become  proverbial  that  men  usually  attribute 
the  sufferings  they  endure  to  any  cause  but  the  right  one. 
This  tendency  was  never  more  strikingly  realized  than  in  the 
present  disposition  to  attribute  the  commercial  depression  of 
recent  times  to  free  trade — to  over-production  and  to  foreign 
competition — and  this,  regardless  of  the  fact  that  foreign 
nations  are  suffering  equally  with  ourselves.  Those  who 
reason  thus  little  dream  that,  except  to  a  very  limited  extent, 
free  trade  has  never  been  tried,  and  that  therefore  it  cannot 
have  proved  a  failure.  While  the  oppressive  and  costly  sys- 
tem of  indirect  taxation  and  the  disastrous  monopoly  of  money 
remain,  it  is  perfectly  idle  to  talk  of  free  trade  having  been 
tried  in  this*  or  any  other  country.  The  principle  is  right — 
perfect  freedom  of  exchange  between  nations  and  individuals 
— and  what  is  needed  is  simply  to  carry  it  out. 

152  It  is  the  monopoly  of  the  banking  system  to  which 
we  propose  to  call  attention  in  the  present  paper.  Our  object 
will  be  to  show  that  the  English  bank    and  currency  laws, 


*  The  Westtninster  Revie-w  is  an  English  magazine. 


WE    ML'ST    HAVi:    GOVERNMEXT 


79 


and  especially  the  Bank  Act  of  1S44,  have  been  most  disas- 
trous in  their  influence  on  industry  and  commerce,  and  that 
they  are,  at  the  present  moment  a  most  influential  cause  of  the 
long-continued  and  wide-spread  depression  which  all  lament. 

153  This  subject  was  exhaustively  treated  in  the  January 
number  of  this  Review  for  1S58;  and  many  clear  thinkers 
had  at  that  time  denounced  the  existing  system,  but  the  effort 
failed  to  arouse  public  attention  sufliciently  to  ensure  a  rem- 
edy; and  subsequent  events  have  formidably  aggravated  the 
evil,  rendering  it  imperative  now  to  reiterate  the  expose  of 
this  gigantic  wrong,  with  a  view  to  its  speedv  removal. 

154  It  is  impossible  to  over-estimate  the  importance  of 
an  abundance  and  reo^ular  supply  of  money.  It  is  abso- 
lutely essential  to  that  freedom  of  exchange  on  which 
healthy  comm^erce  and  natiofzal  ^vell-beifig  depend.  [Italics 
mine.]  But  our  bank  laws  have  rendered  these  conditions 
impossible  by  arbitrary  and  wholly  unjustifiable  interference 
with  the  conditions  of  supply  and  demand  which  affect  monev 

precisely  as  they  affect  every  other  commodity 

Not  only  has  the  supply  been  needlessly  restricted,  but  that 
restriction  has  been  so  capricious,  so  frequent,  so  sudden  and 
so  extreme,  that  panic  and  commercial  disaster  have  followed 
to  an  incalculable  extent. 

155  The  Bank  of  England  was  established  in  1694,  and 
on  free  trade  principles.  It  was  a  joint-stock  company,  and 
it  commenced  its  operations  with  a  loan  to  the  government, 
then  very  much  pressed  for  money  to  carry  on  a  war  with 
France.  Patterson,  its  intelligent  founder,  had  no  idea  what- 
ever of  its  having  any  monopoly  or  special  privilege,  but  he 
soon  ceased  to  be  one  of  its  directors,  and  in  170S,  only  four- 
teen years  after  its  establishment,  the  government,  in  return 
for  another  loan,  passed  a  law  that  no  other  joint-stock  bank 
should  remain  in  England.  The  result  was  the  establishment 
of  a  large  number  of  small  banks  which,  unable  to  stand 
against  the  intensely  selfish  manipulations  of  the  government 
protege^  perished  in  numbers  in  every  commercial  crisis  and 
rendered  a  safe  system  of  banking  impossible. 

156  It  was  not  until  1826  tiiat  the  government  partly 
reversed  this  mischievous  policy  and  permitted  the  establish, 
ment  of  joint-stock  banks  in  England.  Even  now  they  are 
not  allowed  to  issue  any  notes,  though  their  subscribed  cap- 
ital and  reserve  fund,  taken  together,  are  many  times  greater 
than  those  of  the  Bank  of  England. 


8o  THE    NEW    PHILOSOPHY    OF    MONEY 

157  The  worst  evils  of  the  monopoly  of  the  Bank  of 
England  were  not  felt  till  the  present  century.  Towards 
the  close  off  the  last  century,  the  wars  in  which  we  were 
engaged  drained  the  national  resources,  and  exhausted  the 
ingenuity  of  Mr.  Pitt  in  the  endeavor  to  raise  the  "sinews  of 
war."  The  transition  was  frequent  from  increased  imposts 
on  commodities  to  income  tax,  and  from  that  to  enormous 
loans  to  be  paid  in  some  indefinite  future,  under  the  burden 
of  which  we  now  groan.  But  all  would  not  avail,  not  even 
with  the  iniquitous  redemption  of  the  land  tax — that  last 
attempt  to  free  land  from  all  responsibility  and  to  throw  the 
whole  burden  of  taxation  on  the  people.  But  even  this  would 
not  serve  and  in  1793  specie  payment  was  suspended  and  the 
currency  was  entirely  carried  on  by  paper  money  until  specie 
payment  was  resumed  in  1819.  The  conclusion  of  the  war 
naturally  caused  great  changes  in  commercial  affairs.  Corn 
had  been  grown  at  home  during  its  continuance,  prices  had 
been  high  and  rents'had  risen.  But  when  foreign  corn  was 
admitted,  prices  fell  and  rents  could  not  be  maintained.  To 
keep  up  rents  without  ruin  to  farmers  the  corn  laws  were 
imposed  in  1S16  and  the  burden  of  taxation  was  still  further 
thrown  upon  the  people. 

158  But  to  aggravate  the  evil  a  stupendous  change  was 
made  the  same  year  in  the  currency  laws,  fraught  with  untold 
mischief — the  demonetization  of  silver.  Up  to  that  time  sil- 
ver and  gold  had  been  alike  legal  tender  and  together  they 
had  been  far  from  sufficient  for  the  requirements  of  the 
nation.  Gold  had  been  1105^.  per  ounce,  its  nominal  price 
being  77^.  lod.  Panic  and  ruin  had  prevailed  in  the  three 
previous  years,  1814-15-16;  ninety  provincial  banks  having 
become  bankrupt  and  as  many  more  having  been  dissolved; 
and  yet  our  infatuated  rulers  must  needs  increase  the  evil 
infinitely  more  by  decreeing  in  1S16  that  silver  should  no 
longer  be  a  legal  tender  beyond  the  amount  of  405. 

159  The  infatuation  of  this  step  it  is  impossible  to  appre- 
ciate or  account  for.  Continual  scarcity  of  money  had  pro- 
duced the  same  disastrous  results.  There  was  a  panic  from 
this  cause  in  1793  and  it  could  only  be  relieved  by  the  issue 
of  ^£"5,000,000  in  Exchequer  bills  and  in  181 1  a  similar  crisis 
occurred  which  was  relieved  by  the  same  ineans. 

160  In  18 19,  with  gold  the  only  legal  tender  and  the  sup- 
ply of  money  thus  artificially  limited,  the  government  re- 
turned to  cash  payments  and  at  the  same   time    materially 


WE    MUST    HAVE    GOVERNMENT  Si 

restricted  the  paper  currency.  To  intensify  this  evil,  they 
lent  ^"30,000,000  of  gold  to  the  French  government,  and, 
still  worse,  the  supply  of  gold  from  the  American  mines  had 
materially  fallen  off.  The  consequence  was  a  depression  of 
trade  and  general  distress  and  ruin  terrible  to  contemplate. 
The  attempted  remedy  was  monstrous.  Instead  of  an 
increased  paper  issue,  this  was  still  further  contracted  and 
discounts  were  restricted,  in  order  to  bring  gold  from  abroad. 
Though  the  directors  of  the  Bank  of  England  told  the  gov- 
ernment that  the  act  would  ruin  tlie  great  body  of  the  peo- 
ple, it  was  passed.  Up  to  1S19  the  supply  of  precious  metals 
had  sunk  to  one-half,  at  the  same  time  that  the  trade  of  the 
country  had  immensely  increased.  These  measures  were 
followed  in  1826  by  one  of  the  most  disastrous  panics  the 
world  has  ever  witnessed.  Alison  in  his  great  history  dwells 
emphatically  upon  the  ruinous  results  of  the  diminished  sup- 
ply of  the  precious  metals  from  the  American  mines  com- 
bined with  the  contraction  of  the  currency  in  our  own 
country.  As  in  the  present  crisis,  the  effect  of  this  mis- 
chievous policy  was  attributed  to  a  wrong  cause,  and 
demands  were  made  for  protection  against  importation  from 
foreign  lands.  The  panic  of  1S26  was  caused  entirely  by 
the  capricious  action  of  the  bank  authorities.  For  some 
years  they  increased  their  circulation  of  paper  money,  and 
then,  finding  their  stock  of  gold  nearly  exhausted,  they  sud- 
denly diminished  the  note  circulation  to  the  extent  of  ^£"3,- 
500,000.  A  general  distrust  took  the  place  of  undue  confi- 
dence which  had  pervaded  the  country;  the  notes  of  the 
countrv  banks  were  returned  upon  them  to  such  a  degree 
that  a  great  number  failed  and  a  "run"  upon  many  London 
bankers  ensued,  followed  by  the  stoppage  of  several.  Com- 
mercial distress  of  the  most  friglitful  description  followed, 
and  such  was  the  loss  of  confidence  that  the  wealthiest  mer- 
chants were  driven  to  make  heavy  sacrifices  of  property,  in 
order  to  make  provision  for  their  immediate  engagements. 
To  use  the  memorable  expression  of  ^Mr.  Huskison,  ''the 
country  was  within  twenty-four  hours  of  barter."  The  rem- 
edy was  found  in  again  iticreasing  the  paper  currency.  The 
bank  had  caused  the  panic  by  limiting  the  circulation  to  save 
itself.  It  increased  the  paper  circulation  again  and  the  panic 
ceased.  Between  November  3rd  and  December  29tb,  the 
amount  of  mercantile  bills  muler  discount  increased  from 
£4,000,000  to  ^15,000,000;  the  number  of  bills  discounted 


82  THE    NEW    PHILOSOPHY    OF    MONEY 

in  one  particular  day  being  4,200.  The  effort  thus  made 
was  assisted  by  one  circumstance,  purely  accidental.  A  box 
containing  £1  notes  which  had  been  overlooked  when  the 
bank  called  in  all  its  notes  under  £5,  was  discovered  just  in 
time,  and,  in  the  opinion  of  Mr.  Harmon,  one  of  the  direct- 
ors, the  timely  issue  of  these  notes  "worked  wonders;  it 
saved  the  credit  of  the  country."  Between  December  3rd 
and  31st  the  bank-notes  in  circulation  were  increased  from 
c£  1 7,000,000  to  £35,000,000.  This  great  increase  was  neces- 
sary to  replace  the  notes  of  the  country  bankers  that  had 
suddenly  been  withdrawn  from  circulation,  and  to  counteract 
the  tendency  to  hoarding  always  indulged  in  by  timid  per- 
sons in  periods  of  embarassment.  Foreign  exchanges  again 
turned  in  our  favor  and  the  gold  forced  abroad  by  previous 
mismanagement  came  back. 

161  The  next  foolish  step  taken  by  the  government  was 
in  1829  when  all  notes  for  less  than  £^  were  made  illegal  in 
England.  It  was  proposed  to  apply  this  law  to  Scotland, 
but  the  sagacity  of  Sir  Walter  Scott  saved  Scotland  from  the 
calamity,  and  she  enjoys  the  circulation  of  her  ,£1  notes  to 
this  day. 

162  From  this  time  a  panic  seems  to  have  occurred  about 
once  in  ten  years,  and  partial  ones  more  frequently,  alvva^'S 
traceable  to  scarcity  of  money  arising  from  the  peculiar  lia- 
bility of  gold  to  be  withdrawn  to  other  countries.  In  1837 
one  of  these  crises  occurred  after  three  or  four  years  of  com- 
parative prosjDerity,  occasioned  by  the  despotic  action  of 
President  Jackson  in  the  United  States  forbidding  bank- 
notes to  be  recognized  as  legal  tender,  and  requiring  all  pay- 
ments to  the  government  to  be  made  in  gold  and  silver. 
Trade  was  checked  in  the  States,  interest  rose  to  24  j^er  cent 
and  a  large  drain  of  gold  from  England  followed.  The 
Bank  of  England  raised  the  discount  to  6  per  cent  and  bor- 
rowed £2,000,000  from  Parisian  bankers.  English  trade 
suffered  severely. 

163  It  is  strange,  beyond  conception,  that  the  disasters 
resulting  from  the  note  circulation  and  rate  of  discount 
being  dej^endent  upon  the  amount  of  gold  in  the  bank,  did 
not  lead  to  some  effectual  remedy.  On  the  contrary,  the 
infatuation  was  so  complete,  that  from  this  time,  the  bank 
stereotyped  In  the  act  of  1844  this  ruinous  system,  leaving 
the  trade  of  England  at  the  mercy  of  every  foreign  power, 
and  producing  one  disastrous  crisis  after  another. 


WE    MUST    HAVE    GO\'ERNMENT  83 

164  From  1S40  to  1S43  an  inllux  of  Russian  gold  gave 
some  relief  to  commerce.  This  gold,  the  product  of  Russian 
mines,  had  hitherto  been  allowed  to  lie  in  the  bank  coffers  of 
Russia.  It  was  now  employed  in  the  purchase  of  govern- 
ment stocks  in  the  west  of  Europe  and  especially  in  the 
British  funds.  In  1S43  the  bullion  in  the  Bank  of  Ep'^^Iand 
was  A* 1 6,000,000 — four  times  the  average  since  1831.  The 
Bank  Act  of  1844,  bowever,  neutralized  the  advantages  that 
should  have  arisen  from  the  influx  of  Russian  gold;  it 
allowed  no  increased  issue  of  notes  except  those  of  the  Bank 
of  England;  it  limited  the  issue  of  that  bank,  causing  the 
amount  to  be  determined  by  the  amount  of  gold  in  its  cellars, 
and  did  not  allow  even  the  Bank  of  Scotland  to  issue  any 
unless  it  retained  in  its  coffers  an  equal  amount  of  gold.* 

165  Sir  Robert  Peel  well  knew  the  far-reaching  effect  of 
any  alteration  in  the  currency  laws,  but  he  was  totally  blind 
to  the  real  nature  of  the  act  which  he  introduced.  Instead 
of  being  alive  to  the  disastrous  effects  of  the  act  of  18 19,  he 
described  that  of  1844  as  merely  the  complement  of  it,  and 
he  perpetuated  its  worst  features  in  an  aggravated  form.  Its 
two  great  evils  arc:  i,  the  extreme  liability  to  disturbance 
from  the  regulations  with  regard  to  gold;  2,  the  capricious 
and  arbitrary  limitations  of  the  paper  currency. 

166  The  principal  provisions  of  the  Bank  Charter  are 
briefly  these :t  i.  That  after  1844  no  new  bank  should  be 
permitted  to  issue  bank-notes  and  that  no  bank  whatever 
should  issue  a  note  in  London  or  within  sixty-five  miles  of 
London,  except,  of  course,  the  Bank  of  England. 

167  2.  The  banks  enjo\'ing  the  right  of  issue  previous 
to  1844  should  be  forbidden  to  extend  it,  whatever  may  be 
the  future  expansion  of  their  business. 

168  3.  That  a  fixed  amount  of  .£14,000,000  in  notes 
might  in  future  be  issued  by  the  Bank  of  England  against  a 
like  amount  lent  to  the  government  by  the  bank.  All  fur. 
ther  issues  to  be  covered  by  bullion,  of  which  not  exceeding 
one-fourth  may  be  silver.  This  last  provision  is  utterly  use- 
less, since  millions  of  silver  may  not  pay  one  JC5  note. 

169  4.  In  case  of  private  banks  ceasing  to  issue  notes, 
the  Queen  in  Council  may  authorize  the  bank  to  increase  its 
note  issues  by  two-thirds  of  the  amount  so  withdrawn. 


*  Paterson's  "New  Golden  Age." 
■(■"Financial  Reformer  Almanac,"  1S85. 


84  THE    XEW    PHILOSOPHY    OF    MONEY 

170  In  ^855  this  power  was  exercised  and  further  note 
issues  of  £475,000  against  stock  were  sanctioned,  such  being 
two-thirds  of  their  discontinued  private  issues. 

171  A  somewhat  similar  arrangement  followed  with 
regard  to  the  Bank  of  Ireland  and  special  provisions  were 
permitted  for  Scotland.  But  in  both  countries  the  amount 
of  circulation  was  closely  restricted.  No  new  banks  of  issue 
were  permitted  and  in  consequence  no  new  bank  has  been 
established  in  this  country,  so  far  as  we  know. 

172  The  following  are  some  of  the  effects  of  this  Bank 
Act:  The  number  of  banks  enjoying  the  petty  right  of  a  fixed 
issue  has  steadily  decreased  from  £9,750,000,  forty-four 
years  ago,  to  £3,250,000  in  1SS3.  On  the  other  hand,  the 
Bank  of  England,  whose  whole  note  issue  was  £15,750,000 
in  1840  (that  is,  six  millions  above  theirs),  was  £25,000,000 
in  18S3,  or  twenty-three  and  three-fourths  millions  above 
theirs.  The  total  inadequacy  of  this  note  issue  to  the 
requirements  of  the  country  is  proved  by  a  recent  statement 
from  the  Eco7iomist  to  the  effect  that  the  note  circulation  in 
England  in  1844  was  over  205.  per  head  of  the  population 
and  is  now  under  \os.  per  head.  The  imports  and  exports 
of  Britain  per  head  in  1S54  were  £9  145'.  and  in  1SS6  £20 
45-.  The  currency  is  thus  reduced  to  one-sixth  as  compared 
to  the  work  to  be  done. 

173  The  only  proof  required  of  the  utter  rottenness  of 
the  Bank  Act  of  1844  ^^  found  in  the  fact  that  on  three 
occasions, — namely,  in  1847,  1857  and  1866 — its  operation 
has  been  suspended  by  government,  not  to  relieve  commer- 
cial distress,  ^z^/  to  save  the  bank  fro7ri  stopping  payment. 
Immediate  relief  and  cessation  of  panic  have  in  every  case 
followed  its  suspension;  proving  beyond  question  that  the 
crisis  was  artificial  and  unnecessary, — created,  in  fact,  by  the 
law  itself. 

174  The  panic  in  1S47  began  by  failures  in  the  corn 
trade.  Wheat  fell  from  \20s.  to  60s.  the  quarter.  Then 
several  banks  failed:  the  general  complaint  was  want  of 
money.  The  bank  rate  was  raised  from  3  to  7/^  per  cent 
and  panic  followed.  The  pressure  continued,  with  ruin  on 
every  hand  until  the  government  authorized  the  bank  to 
issue  more  notes  than  the  law  allowed.  The  effect  was 
immediate.  Confidence  was  restored.  Hoarded  notes  were 
brought  out  and  discounts  were  everywhere  readily  obtained. 
£7,500,000  of  bullion  had  left  the  bank  and  notes  had  conse- 


AVE    MUST    HAVE    GOVERNMENT  85 

quently  been  diminished  to  that  extent.  The  bank  advanced 
^4,000,000  in  one  day  in  sums  of  from  .£300,000  to  £50,000 
to  different  banks  and  London  houses.  The  panic  ceased, 
but  the  number  of  tradespeople  irretrievably  ruined  and  the 
wide-spread  misery  will  never  be  told. 

175  The  crisis  of  1857  began  with  extensive  failures  in 
America  from  over  speculation  in  railways,  land,  etc.,  result- 
ing in  failures  in  England.  The  drain  of  gold  was  such  that 
on  the  12th  November,  with  discount  at  10  per  cent,  the  total 
reserve  in  the  bank  was  only  £384,1.^4  and  at  its  branches 
jC  196,607  more.  The  bankers'  claims  alone  against  it  were 
^£■5,458,000.  It  is  clear,  therefore,  that  but  for  the  suspen- 
sion of  the  act  the  bank  must  have  stopped.  Thousands  by 
this  time  had  been  ruined.  An  order  in  council  again 
authorized  an  extensive  issue  of  bank-notes  and  the  panic 
ceased.  JC6, 776,000  were  issued  beyond  the  limit  fixed  by 
the  act.  No  further  proof  is  required  of  the  utter  rottenness 
of  the  act  than  the  fact  that  it  required  to  be  suspended  and 
its  mode  of  operation  entirely  reversed,  within  three  years 
after  its  enactment  and  twice  more  within  twenty  years.  It 
was  after  this  terrible  crisis  that  Mr.  Gladstone  said:  "The 
act  cannot  stand  as  it  is.  I  cannot  consent  that  the  law  shall 
be  suspended  at  intervals  to  meet  these  constantly  recurring 
crises.  The  act  was  damaged  in  1847.  It  was  shattered  in 
1857." 

176  y\nd  yet  thirty  years  have  elapsed  and  this  ruinous 
act  is  in  operation  still  and  it  is  steadily  precipitating  the 
nation  into  commercial  ruin  and  social  and  political  confu- 
sion. Prices  are  steadily  going  down,  investments  are 
becoming  unprofitable,  all  fixed  charges,  including  rents,  sal- 
aries, mortgages,  wages  and  taxes  are  becoming  more  bur- 
densome every  day.  Trade  is  being  carried  on  at  a  loss;  and 
all  this  that  the  monopolist  bank  may  enrich  its  proprietors 
by  the  ruin  of  the  nation,*  Wages  are  coming  down,  but 
too  slowly  to  save  employers  from  ruin.  The  trades  unions 
are  most  unwilling  to  submit  to  any  reduction,  though  their 
■members  benefit  by  the  low  prices  that  prevail.  The  pur- 
chasing power  of  what  they  earn  is  two  or  three  times  what 
it  was  a  few  3'ears  ago,  yet  they  will  go  on  strike  rather  than 
submit  to  a  ten  per  cent  reduction. 


*  Precisely  the  same  effect  that  monopoly  of  money  has  produced 
in  this  country. 


86  THE    NEW    PHILOSOPHY    OF    MONEY 

177  That  such  would  be  the  effect  of  the  Bank  Act  of 
1844  was  clearly  seen  by  some  of  its  most  ardent  supporters. 
Lord  Ashburton,  one  of  its  prime  champions,  said:  "Our 
monetary  laws  put  it  in  the  power  of  a  few  shrewd  capital- 
ists so  to  contract  the  supply  of  gold  as  to  embarrass  the 
bank  and  nearly  ruin  the  nation."  Lord  Overstone,  another 
advocate  of  the  system,  said:  "Against  the  actual  exhaus- 
tion of  its  treasures  through  forei'gn  exchange,  the  bank  has 
the  power  of  protecting  itself.  But  to  do  this  she  must  pro- 
duce a  pressure  upon  the  money  market  ruinous  for  its  sud- 
denness and  severity.  She  must  save  herself  by  the  ruin  of 
all  around  her." 

178  The  result  has  proved,  as  we  have  shown,  the  base- 
lessness of  the  first  part  of  this  latter  declaration ;  for  without 
its  illegal  suspension  on  three  several  occasions,  the  bank 
would  have  become  insolvent.  The  latter  statem.ent  as  to  the 
ruin  of  all  around  her  is  too  true,  as  thousands  have  proved 
to  their  cost. 

179  The  third  illegal  suspension  of  the  act  was  in  1S66. 
On  this  occasion,  over-trading  and  fictitious  credit  helped  to 
bring  on  the  crisis,  but  many  perfectly  solvent  firms  wei'e 
involved  in  the  ruin,  because  in  the  panic  they  could  not 
meet  the  unprecedented  demand  put  upon  them.  The  Bank 
of  England  could  do  nothing  to  help  them  though  it  had 
plenty  to  do  it  with;  it  could  not,  as  the  law  stood,  convert 
its  assets  into  currency  (bank-notes).  When,  by  an  order  in 
council  allowed  to  do  it,  the  panic  ceased.  No  less  than 
■£4,000,000  were  allowed  in  one  day — altogether,  X5,ooo,ooo. 

180  Before  the  passing  of  the  Bank  Act  of  1844,  the 
bank  rate  rarely  varied  more  than  one  or  two  per  cent.  The 
following  figures,  including  the  period  of  the  last  illegal  sus- 
pensions, will  give  some  idea  of  the  suddenness,  extent  and 
caprice  of  its  fluctuations  since  1S44. 

BANK   RATE    OF   DISCOUNT. 
Years  Per  cent  Per  cent  No.  of  changes  each  year 

1862  2  Aug.  and  Sept.  5 

1864  314  in  ]\Lay       "]%  Sept.  6 

1865  6  March  9  Sept.  9 

1866  10  June,  July     33/^  Dec.  lO 

1867  31^  J''^"-  2  Aug.  to  end  3 

181  Beginning  at  2  per  cent  in  1862,  the  rate  gradually, 
though  irregularly  rises  till  it  obtains  its  maximum  of   10  per 


\VK    MUSr    HAVE    GOVEKN.M  ENT  Sj 

cent  in  June,  1866,  the  very  time  of  the  crisis;  from  which 
time  it  falls  rapidly  until,  in  a  little  more  than  a  year,  it  is  at 
its  minimum  of  2  ])er  cent  again.  Observe,  too,  the  number 
of  changes,  from  live  to  ten  in  a  single  year.  No  wonder 
that  trade  is  depressed  and  that  commercial  panics  are  fre- 
quent w^ith  such  manipulations  of  the  monopolist  bank! 

182  The  following  extract  from  the  Financial  Reformer 
of  Januar}',  1SS6,  is  a  fresh  illustration  of  this  gigantic  evil. 
"The  bank  rate  was  doubled  again,  within  a  little  more  than 
a  month — namely,  from  2  to  4  per  cent,  and  this  not,  as  far 
as  appears,  from  any  revival  of  business,  and  consequently 
increased  healthy  demand  for  ciedit,  but  only,  as  usual,  from 
some  light  export  of  gold;  so  that  for  a  cause  really  in  no 
way  arising  from  or  indirectly  concerning  the  general  trade 
of  the  country,  traders  are,  as  we  have  several  times  pointed 
out,  taxed  without  their  consent,  at  the  rate  of  £100,000,000 
a  year — which  is,  nevertheless,  taken  quite  as  a  matter  of 
course — newspapers  and  Chambers  of  Commerce  uttering 
never  a  word  of  complaint,  notwithstanding  general  stagna- 
tion and  failure  of  profit.  If  Parliament  were  to  impose  by 
law  an  extra  tax  of  one-tenth  the  amount,  it  would  make  an 
outcry  throughout  the  three  kingdoms.  But  the  Bank  Act 
may  do  what  mischief  it  will.  People  do  not,  and  appar- 
ently will  not  take  the  trouble  to  understand  its  operations 
and  so  they  continue  to  suffer.  It  is  beyond  question  that 
the  bank  monopoly  and  the  act  of  1844  are  a  principal  cause 
of  depression  in  business;  and  equally  certain,  in  our  opinion, 
that  nothing  like  permanent  or  steady  prosperity  can  exist 
while  they  continue.  All  our  forty  years  of  experience  of 
them  proves  this  most  abundantly;  but  for  some  inscrutable 
reason,  John  Bull  prefers  to  go  on  suffering,  instead  of  'put- 
ting himself  to  school'  on  this  question  and  learning  to  un- 
derstand what  is  no  such  really  difficult  matter,  after  all." 

183  These  well-marked  crises  which  occur  once  in  ten 
years  or  oftener  are  not  the  only  evil  of  our  hidebound  cur- 
rency. They  may  be  regarded  as  the  acute  form  of  the  dis- 
ease. But  there  is  a  chronic  malady  not  less  formidable  nor 
less  threatening  to  the  permanent  welfare  of  the  nation. 
The  supply  of  gold  and  silver  has  long  been  inadequate  to 
the  requirements  of  commerce.  Even  with  all  the  forms  of 
paper  cm-rency  still  the  gold  produced  has  been  insufficient 
for  the  growing  wants  of  the  world.  We  have  seen  how  the 
flow  of  gold  from  Russia  in  1S40-43  was  neutralized  by  the 


SS  THE    NEW    PHILOSOPHY    OF    :M0NEY 

Bank  Act  of  1S44.  The  depression  of  prices  continued  with- 
out abatement  until  the  discovery  of  the  gold  fields  of  Cali- 
fornia in  1S48  and  of  Australia  in  1851,  poured  into  Europe 
an  unprecedented  supply  of  gold,  at  once  relieving  the  pre- 
vailing distress  and  inaugurating  a  quarter  of  a  century  of 
prosperity  to  which  the  world's  history  presents  no  parallel. 
Up  to  this  point,  even  the  repeal  of  the  corn  laws  had  done 
nothing  to  improve  trade.  Food  had  been  placed  within  the 
reach  of  starving  thousands,  but  the  first  effect  on  agriculture 
was  injurious  rather  than  beneficial  and  prices  of  all  kinds 
remained  ruinously  low. 

184  From  1846  to  1851  the  times  were  at  their  worst. 
Farmers  and  manufacturers  suffered  alike,  while  low  wages 
and  lack  of  employment  fell  heavily  on  the  working  classes. 
But  when  the  gold  began  to  pour  into  Europe  from  Califor- 
nia and  Australia,  it  immediately  gave  relief  to  trade  at  home 
and  it  gave  a  powerful  impulse  to  industry,  giving  employ- 
ment to  shipping  and  every  other  department  of  trade.  Ten 
millions  sterling  w^ere  made  annually  at  the  diggings  in  Aus- 
tralia and  the  farmers  worked  the  land,  so  that  the  gold  col- 
onies steadily  increased  in  wealth.  An  immense  trade  sprang 
up  which  greatly  benefited  this  and  other  countries,  giving 
lucrative  employment  to  thousands.  From  this  time  wages 
rose  and  prices  of  all  commodities  advanced  steadily  and  an 
era  of  prosperity  set  in  such  as  the  world  had  never  wit- 
nessed before.  Alison,  the  historian,  in  view  of  these  facts, 
called  the  gold  discovery  "a  currency  extension  act  of  nature." 

185  At  one  time  it  was  apprehended  that  the  supply  of 
gold  would  be  too  great,  and  that  an  injurious  reaction  would 
follow.  M.  Chevalier,  a  distinguished  French  economist, 
wrote  a  book  warning  the  world  of  this  apprehended  event. 
But  the  apprehension  was  groundless.  Two  events  con- 
curred to  prevent  the  catastrophe.  The  one  was  the  falling 
off  of  the  gold  supply  to  a  much  smaller  annual  production 
than  at  first;  the  other  was  the  absorption  of  silver  in  the 
Indian  and  Chinese  trade;  the  new  gold  taking  the  place  of 
the  silver  sent  to  the  east.  France  alone  absorbed  j£ioo,ooo, 
000  worth  of  gold  in  this  way.  To  these  may  be  added  the 
fact  of  Germany  having  adopted  a  gold  standard  in  1S73 
and  having  been  followed  in  that  course  by  several  of  the 
European  nations,  thus  still  further  enhancing  the  price  of 
gold.  At  the  same  time,  since  the  discovery  of  silver  in 
Nevada,  the  supply  of  silver  was  naturally  increased  till  now 


WE    MUST    HAVE    GO\'ERNMEXT  89 

the  difference  in  value  between  the  two  is  no  less  than  14  per 
cent.  Several  other  European  States  have  since  followed 
the  example  of  Germany  in  repudiating  a  silver  currency, — 
all  tending  to  aggravate  the  evil  and  rendering  possible  the 
most  disastrous  disturbance  of  commercial  relations  through- 
out the  world. 

1S6  This  discrepancy  affects  most  injuriously  all  our  com- 
mercial relations  with  India.  The  normal  value  of  silver  is 
6od.  per  ounce.  It  is  now  only  worth  49^?.  or  about  four- 
fifths  of  its  proper  value.  India  has  yearly  to  remit  to 
England  .£15,000,000  which  must  here  be  paid  in  gold,  so  that 
more  silver  has  to  be  remitted  to  make  up  for  its  deprecia- 
tion. But  the  purchasing  power  in  India  remains  and  there- 
fore, by  the  aid  of  Council  drafts  corn  is  purchased  in  India 
and  sent  over  to  this  country  instead  of  coin.  From  the  same 
cause,  the  purchase  of  goods  in  England  is  discouraged, 
because  Indian  silver  buys  less  than  gold  and  less  of  those 
articles  which  have  to  be  paid  for  in  gold.  So  the  tendency 
is  to  encourage  exports  from  India  but  to  discourage  imports. 
With  every  fall  in  the  price  of  silver  wheat  exports  from 
India  increase;  with  every  rise  in  silver,  they  are  checked; 
so  that  the  English  farmer  is  actually  paying  a  bonus  on 
Indian  wheat  at  the  rate  of  55.  ^d.  a  quarter.  For  the  same 
reason,  English  manufactures  are  checked.  Indian  silver  will 
buy  just  so  much  less  of  English  goods  as  the  difference 
in  value  between  gold  and  silver — a  monstrous  injustice  alike 
to  British  manufacturers  and  to  farmers,  and  to  our  Indian 
fellow-subjects.* 

1 87  The  gross  injustice  and  oppression  of  the  repudiation 
of  silver  as  a  legal  tender  is  further  illustrated  by  its  effect 
on  the  national  debt.  In  the  year  1816  that  debt  amounted 
to  ,£850,000,000  sterling.  But  the  demonetization  of  silver 
converted  it  into  a  debt  of  850,000,000  gold  sovereigns.  The 
effect  of  that  change,  now  that  gold  is  14  per  cent  more  val- 
uable than  it  was  in  18 16,  is  to  increase  the  debt  by  jCioo,- 
000,000  and  the  interest  which  the  tax-paver  has  to  pay 
every  year  by  more  than  £^2,000,000.  With  every  rise  in 
the  price  of  gold,  this  burden  will  press  more  heavily. 

188  The  currency  question  is  very  generally  avoided, 
imder  the  impression  that  it  is  so  very  complicated  that  none 
but  accomplished  experts  can  have  an  opinion  of  it.       But, 


*  Moreton  Frewer. 


go  THE    NEW    PIIII.OSOPIIV    OF    MONEY 

like  every  great  question,  though  many  of  its  details  are 
complicated  and  embarrassing,  there  is  away  af  looking  at  it 
which  will  enable  every  person  of  average  capacity  and 
knowledge  to  form  a  practical  conclusion  on  the  subject.  In 
the  foregoing  pages  stupendous  evils  have  been  exhibited 
and  traced  to  their  true  cause — the  arbitrary  interference  of 
the  government  with  the  law  of  supply  and  demand,  in  rela- 
tion to  bank-notes  and  to  gold  and  silver.  We  simply 
require  free  trade  in  money,  instead  of  the  monopoly  and  the 
privileged  manipulations  of  the  monopolist  Bank  of  England. 
The  reform  needed  comprises  palpably  two  particulars: 

189  I.  Free  trade  principles  must  be  applied  to  bank- 
notes. Every  bank  must  be  at  liberty  to  issue  them  accord- 
ing to  its  means  and  requirements  as  men  in  other  business 
are  left  to  decide  for  themselves  the  amount  of  credit  they 
shall  seek  to  obtain — the  sole  condition  required  by  the  gov- 
ernment being  that  they  shall  pay  in  coin  on  demand  the 
value  of  every  note  (323,  326,  330).  The  disasters  of  the 
past,  which  have  thrown  discredit  on  this  principle,  have 
been  caused  by  the  government  releasing  bankers  from  this 
responsibility  and  authorizing  an  inconvertible  paper  cur- 
rency. If  left  to  the  natural  operation  of  supply  and  demand 
the  issue  of  bank-notes  will  be  healthy  and  dishonest  specu- 
lators will  speedily  meet  their  deserts. 

190  2.  The  fatal  step  taken  in  the  demonetization  of 
silver  must  be  retraced.  Silver  must  again  be  admitted  as  a 
legal  tender  (341)  to  an  unlimited  extent,  as  it  was  before 
the  fatal  departure  of  tSi6,  confirmed  and  aggravated  as  it 
has  been  in  its  ruinous  influence  by  the  Banking  Act  of  1844. 

191  Till  these  changes  have  been  effected  and  fairly  tried, 
let  no  one  exclaim  against  free  trade  as  the  cause  of  commer- 
cial depression.  Let  the  banking  system  be  rendered  com- 
mensurate with  the  wants  of  the  nation  and  placed  in  har- 
mony with  the  teachings  of  common  sense  and  experience, 
and  then  will  dawn  upon  our  country  such  an  era  of  steady 
commercial  prosperity  as  has  never  hitherto  been  realized 
except  in  the  dreams  of  Utopia. 


MONOPOLY. 

193  If  two  individuals  living  near  each  other,  one  of 
them  having  a  well,  and  no  other  water  is  accessible — if  the 
owner  of  the  well  should  exact  service  from  the  other  in 
exchange  for  the  water  which  he  allows  him  to  take  from 
the  well,  it  is  in  no  sense  monopoly.  But  if  an  artificial 
restriction  in  the  shape  of  a  statute  or  municipal  act  should 
prohibit  the  man  who  has  no  well  from  digging  one  or 
catching  rain  water,  then  there  would  be  monopoly.  There 
would  not  be  equal  opportunity.  Not  being  allowed  to  sup- 
ply himself,  he  is  dependent  upon  the  other  in  consequence 
of  this  artificial  restriction.  If  there  are  no  restrictions,  the 
one  who  has  no  well  could  dig  one  at  his  leisure  and  thus 
free  himself  from  the  exactions  of  his  neighbor. 

193  It  is  necessary  to  distinguish  between  natural  disad- 
vantages and  artificial  restrictions.  Whatever  natural  disad- 
vantages or  obstacles  Nature  has  put  in  the  way  of  our  com- 
fort, are  burdens  we  must  avoid,  overcome  or  endure.  They 
are  not  designed  or  put  in  the  way  of  some  for  the  benefit  of 
others,  and  we  are  all  liable  to  stumble  onto  more  than  an 
equal  share  of  them.  In  this  we  have  to  take  our  chances. 
Artificial  restrictions  are  quite  different.  They  are  the  work 
of  man;  are  especially  designed  for  the  benefit  of  some,  and 
cannot,  in  the  very  nature  of  things,  be  otherwise  than  disad- 
vantageous to  others;  yet,  while  it  is  an  accepted  theory  that 
no  one  has  a  right  to  benefit  himself  at  the  expense  of 
another  without  that  other's  consent,  such  is  the  nature  of 
our  money  system  that  a  comparative  few  absorb  the  surplus 
earnings  of  all  the  rest  without  their  consent;  and  it  is  done 
by  means  of  artificial  restrictions  which  limit  the  volume  of 
monev  and  consequently  the  volume  of  capital,  thus  iiicreas- 


93  THE    NEW    PHILOSOPHY    OF    MONEY 

ing  profits  to  capital  and  intei'est  on  money,  and  diminishing 
compensation  to  labor  in  the  same  proportion;  for,  as  you 
cannot  take  something  from  nothing,  so,  whatever  the  capi- 
talist or  money-lender  acquires  as  compensation  for  the  use 
of  capital  or  money,  is  taicen  from  labor  without  adequate 
return. 

194  Monopoly  of  the  medium  of  exchange  is  the  most 
cruel  of  all  monopolies,  because  it  is  the  basis  of  all  monop- 
oly.* There  is  no  monopoly  known  to  modern  society  that 
would  not  succumb  to  the  effects  of  free  money.  "  Take,  for 
instance,  that  which  results  from  the  tax  on  imports.  Free 
mone}',  or  the  absence  of  all  legislative  interference  with  the 
supply  of  money,  would  result  in  a  supply  of  capital  equal  to 
any  demand  there  might  be  for  it.  It  would  be  supplied 
wherever  needed,  and  in  constantly  increasing  quantity  and 
ever  dmiinishing  rates  of  interest  until  cost  was  reached. 
Since  money  could  be  obtained  under  the  Mutual  Credit  Sys- 
tem on  good  security,  at  one-half  of  one  per  cent  per  annum, 
compensation  to  the  capitalist  for  the  use  of  his  capital  would 
not  long  exceed  that  rate,  or,  as  just  stated,  cost. 

195  Such  a  revolution  in  affairs  would  utterly  destroy  the 
conditions  that  demanded  the  tariff.     Free  trade  in  money  so 


*"The  world's  prices  are  fixed  in  the  market  of  Liverpool  by  ref- 
erence to  gold.  This  is  particularly  in  the  interest  of  gold-owners, 
bondholders,  and  money-lenders  of  England,  for  they  control  her 
laborers,  and  by  her  industrial  powers  the  world.  Their  strong  arm 
is  the  Bank  of  England.  The  Manchester  Chamber  of  Commerce  in 
their  report  of  1S59,  refers  to  it  in  the  following  language:  'That  its 
directors,  twenty-six  in  number,  can,  in  secret  session,  without  the 
consent  of  their  constituents,  decide  the  value  of  all  property,  is  one 
of  the  greatest  crimes  against  civilization.'  'How  do  you  maintain 
your  supply  of  gold.?'  was  asked  by  a  parliamentary  committee  in 
1847.  'By  contracting  our  circulating  notes,  causing  a  decline  of 
prices  and  conseqviently  an  influx  of  gold,'  Avas  the  answer.  Again 
they  remarked:  'There  is  no  means  of  supplying  the  bank  with  gold 
except  by  diminishing  the  bank-notes,  which  immediately  contracts 
the  currency  and  lowers  prices  by  increasing  the  value  of  money.'  . 
.  .  .  .  The  banking  association  controls  all  credit,  and  by  this 
means  the  revenues  of  all  semi-public  industries  and  the  great  nat- 
ional resources.  Capitalism  dominates  production  and  the  producers 
have  not  yet  learned  to  organize  for  their  own  defense." — Pred  Lift- 
comb  in  "iVetf  Occasiotis,^^  Jan.,  18^4. 


MoxoroLV  03 

far  transcends  free  trade  in  merchandise,  that,  having  anni- 
hihited  profit  to  capital,  the  continuance  of  the  tariff  would 
be  a  matter  of  indifference  to  the  element  that  now  lobbies 
for  its  continuance.  "What,  then,  would  prevent  its  repeal? 
196  So  it  would  be  with  all  monopolies.  The  competi- 
tion that  a  surplus  of  capital  would  put  in  motion  would 
checkmate  and  dcstro}-  them.  The  exclusion  of  competition 
is  as  essential  to  monopoly  as  the  exclusion  of  air  is  to  a 
vacuum.  The  admission  of  free  competition  is  as  destricct- 
ive  to  monopoly  as  ihe  free  admissio7i  of  air  is  to  a  vacuum. 
It  is  to  monopoly  that  we  are  indebted  for  the  corruption 
that  has  insinuated  itself  into  and  permeates  the  social  fabric 
from  entl  to  end  and  from  its  center  to  its  edges.  Corrup- 
tion that  stultifies  the  intellect;  that  warj^s  the  judgment; 
that  stimulates  and  rewards  crime;  that  freezes  the  fraternal 
feeling;  that  starves  love  and  nourishes  prostitution;  that  has 
no  prizes  for  intellect  .unless  it  can  be  McKinleyized  or 
Clevelandized  to  serve  party  purposes  or  society  fads.  Its 
rewards  and  its  punishments  are  alike  its  weapons  of  defense 
and  its  hopes  of  j^erpetuity.  Under  the  Mutual  Credit  Sys- 
tem, the  tables  will  be  turned.  Corruption,  no  longer  sus- 
tained by  ill-gotten  wealth,  must  disappear;  and  under  the 
influence  of  the  progress  that  a  real  civilization  and  perpet- 
ual prosperity  will  inaugurate,  will  come  "the  new  time"  of 
which  the  editor  of  the  Arena  so  eloquently  speaks,  "while 
amazed  histoiy,  gazing  long  before  she  writes,  at  last  shall 
pen  the  story  of  the  first  civilization  of  earth  great  and  wise 
enough  to  be  just." 


"MEASURE  OF  VALUE." 

197  Both  "measure  of  value"  and  "standard  of  value"  are 
terms  that  need  a  champion  to  save  them  from  being  blotted 
from  the  vocabulary. 

198  Measure  of  value!  Why  not  a  measure  of  feeling, 
of  pain?     Really,  this  theme  needs  synthesizing! 

199  The  oscillations  of  a  pendulum  under  the  same  con- 
ditions as  to  height  from  the  level  of  the  sea,  temperature, 
length  of  pendulum,  stillness  of  the  air,  etc.,  will  travel  the 
same  distance  between  strokes  in  any  part  of  the  earth.  By 
this  means  we  obtain  a  fixed,  definite  length  through  an 
imvarying  natural  law.  A  unit  of  length  is  thus  a  possibil- 
ity, but  a  unit  of  value  is  an  impossibility.  Value,  like  pain 
or  pleasure,  is  not  a  mathematical  quantity.  It  has  no  exist- 
ence except  as  a  relation  between  two  or  more  objects;  a 
relation  which  is  purely  metaphysical  and  therefore  cannot 
be  measured.  We  can  only  express  more  or  less  of  it  by 
means  of  a  conventional   monetary   unit,*  not    by  a  unit  of 


*  "Money  of  account  performs  the  same  office,  with  regard  to  the 
value  of  things,  that  degrees,  mmiites,  seconds,  etc.,  do  with  regard 
to  angles,  or  as  scales  do  to  geographical  maps,  or  to  plans  of  any 
kind.  In  all  these  inventions  there  is  some  denominative  taken  for 
the  unit.  .  .  .  Just  so,  the  unit  in  money  can  have  no  invariable 
determinate  proportion  to  any  part  of  value;  that  is  to  say,  it  cannot 
be  fixed  in  perpetuity  to  any  particular  quantity  of  gold  and  silver,  or 
any  other  commodity.  The  value  of  commodities  depending  upon 
circumstances  relative  to  themselves,  their  value  ought  to  be  consid- 
ered as  changing  with  respect  to  one  another  only;  consequently, 
anything  which  troubles  or  perplexes  the  ascertaining  these  changes 
of  proportion  by  means  of  a  general  determinate  and  invariable  scale, 
must  be  hurtful  to  trade;  and  this  is  the  infallible  consequence  of 
every  rise  in  the  price  of  money  or  coin.  Money,  as  has  been  said, 
is  an  ideal  scale  of  equal  parts.  If  it  be  demanded  what  ought  to  be 
the  standard  value  of  one  part,  I  answer  by  putting  another  question: 
What  is  the  standard  length  of  a  degree,  a  minute,  or  a  second.' 
None:  and  there  is  no  necessity  for  any  other  than  what,  by  conven- 
tion, mankind  think  fit  to  give." — Sir  %  Sie-vart. 


MEASUUli    OF     A'AIA'E 


95 


itself  as  we  express  length  by  a  unit  of  length,  or  weight  by 
a  unit  of  weight.  As  we  cannot  reach  it  by  mathematics, 
we  cannot  make  a  unit  to  measure  it  with.  It  is  clear,  tiicn, 
that  we  do  not  measure  value  at  all.  One  does  not  say  to  a 
builder,  "will  you  measure  the  cost  of  such  a  building  for 
me?"  No;  wcsay:  ""Will  }'ou  estimate  the  cost  of  such  a 
building?"  Does  he  measure  the  value  of  the  building  when 
he  tells  you  how  many  dollars  it  will  cost?  No.  lie  ex- 
presses the  value  in  terms  of  money.  Does  your  grocer  or 
your  tailor  or  your  dry  goods  merchant  measure  values  when 
he  tells  you  the  price  of  goods?  How  absurd!  As  well 
might  we  talk  of  measuring  the  number  of  bricks  that  enter 
into  the  construction  of  a  building,  or  of  calculating  the  color 
of  a  spectral  ray.  Value  is  not  determined  by  measuring  it, 
but  by  demand  and  supply.  Whatever  monopoly  exists,  of 
course  affects  the  supply,  and  consecjuently  the  market  value; 
but  demand  and  supply,  with  or  without  monopoly,  deter- 
mines value;  and  the  only  proper  function  of  money  is  to 
facilitate  the  distribution  of  things  that  have  value,  by 
exchanging  them  for  it;  the  one  who  gets  the  money  ex. 
changing  it  again  for  something  else.  Now,  it  must  be  evi- 
dent to  anyone  who  will  closely  examine  these  operations, 
that  in  order  that  the  certificates  of  credit  (174)  may  j^ass,  be 
accepted  at  their  face  value  for  the  things  of  value,  it  is  only 
necessary  that  they  be  secured  credit  (9,  10,  12).  It  is  not 
necessary  that  provision  be  made  for  their  redemption  in  a 
stated  definite  quantity  of  some  special  commodity,  but  that 
they  be  redeemed  in  anything  for  not  less  than  their  face 
value,  and  at  the  market  or  prevailing  value  or  price.  And 
this  is  one  of  the  great  advantages  that  the  Mutual  Credit 
System  has  over  all  others;  its  money  is  redeemable  in  all 
commodities  at  their  market  value  instead  of  a  single  com- 
modit)-  in  definite  quantity,  as  is  the  case  with  "standard" 
money.  The  purchasing  power  of  "standard"  money  is 
affected  by  the  rise  or  fall  in  the  market  value  of  the  "stand- 
ard" commodity   (200,   242);  hence  this  purchasing  power 


96  THE    NEW    PHILOSOPHY    OF    MOXEY 

must  vary.  Prices  or  market  values  are  affected,  therefore, 
not  only  by  the  effect  of  the  demand  and  supply  of  the  com- 
modities themselves,  hut  also  by  the  variations  in  the  purchas- 
ing power  of  the  money.  In  other  words,  the  fluctuations 
in  values  are  complex,  but  they  will  be  reduced  to  simple 
fluctuations  by  the  adoption  of  mutual  credit  money  in  place 
of  "standard"  money;  for  the  exchangeable  value*  of  the 
former  can  have  no  effect  whatever  on  the  market  value  of 
any  commodity.  It  is  not  a  commodity,  nor  is  it  affected  by 
any  commodity.  It  is  simply  secured  or  certified  credit  used 
as  a  means  of  exchanging  commodities. 

200  The  following  will,  perhaps,  more  clearly  impress 
this  point  upon  the  mind  of  the  reader.  We  will  suppose 
that  the  Mutual  Credit  System  has  been  put  in  operation  and 
that  both  kinds  of  money  are  now  in  circulation.  The 
"standard"  money  is  redeemable  in  coin;  the  mutual  credit 
money  is  redeemable  as  provided  in  the  plan-j-  and  is  accepted 
at  its  face  value  in  exchange  for  commodities,  prices  being 
the  same  as  for  coin  money.  We  will  now  suppose  that  the 
Mutual  Credit  System  comes  rapidly  into  public  favor  and 
its  money  is  being  issued  in  a  large  nvmnber  of  cities.  The 
demand  for  the  "^^I'^cious"  metals  to  serve  as  a  basis  for 
money  under  such  circumstances  will  very  materially  dimin- 
ish. What  will  be  the  effect  on  the  market  value  of  those 
metals?  They  will  also  very  naturally  depreciate.  What 
effect  will  such  depreciation  have  upon  the  purchasing  power 
of  the  coin  made  of  those  metals?  Their  purchasing  power 
will  inevitably  follow  the  decline  in  the  market  value  of  the 
metals  (242).  What  effect  will  this  decline  in  the  market 
value  of  the  "precious"  metals  have  on  the  exchangeable 
value  of  the  money  of  the  Mutual  Credit  Association?  None 
whatever.       Prices,  then,  for  such  money    will  remain  the 


*  I  deprecate  the  use  of  the  term  "purchasing  power"  when  applied 
to  money  that  circulates  on  its  merits.  It  has  acquired  a  meaning  in 
connection  with  legal  tender  money  and  authority  that  disqualifies  it 
for  expressing  the  exchangeability  of  certificates  of  credit  (359). 

■j"  See  prospectus. 


MEASURE    or    VALUE  97 

same;  while  for  the  first  time,  perhaps,  in  history,  we  shall 
see  gold  prices  quoted  higher  than  prices  for  its  old  rival, — 
paper  money  not  based  on  gold  (65),  to  say  nothing  of  sil- 
ver. Of  course,  the  "standard"  paper  money  will  go  down 
along  with  the  coin.     This  is  the  inevitable  result. 

201  Now,  let  us  examine  the  position  of  my  opponents 
on  this  question  of  a  measure  or  standard  of  value.* 

202  The  terms,  "measure  of  value"  and  "standard  of 
value,"  are  used  in  the  same  sense  by  those  who  maintain 
their  existence  or  necessity;  they  are  interchangeable,  so  that 
either  term  may  be  used. 

203  The  supporters  of  the  idea  of  a  "standard  of  value" 
maintain  that  paper  money,  unless  it  is  redeemable  in  a  defi- 
nite quantity  of  some  special  commodity,  would  have  no 
definite  exchangeable  value;  that  this  quantity  in  which  the 
paper  dollar  must  be  redeemable,  is  thus  constituted  the 
"measure"  and  "standard"  of  value.-j-      This  is  precisely  the 


*  "Although  standard  and  value,  or  definite  invariable  fact  and  in- 
definite variable  state  of  mind,  are  as  opposite  as  the  poles,  yet 
because  we  can  unite  the  words,  standard  and  value,  into  the  glib 
phrase,  "standard  of  value,"  we  imagine  when  we  have  done  so  that 
fact  and  sentiment  have  thereby  become  welded  into  a  reality,  defi- 
nite and  comprehensive  enough  to  test  or  measure  all  other  "things, 
or  that  we  really  have  a  "standard  of  value."  But  blinded  by  cus- 
tom, misled  by  authority,  and  confounding  exchangeability  with 
standard  of  value,  we  cannot  see  that  though  we  have  a  name  we 
have  not  a  fact,  and  that  standard  of  value  is  an  impossibility,  a  will- 
o'-the-wisp  luring  to  ruin.  Exchangeability,  however  great,  can 
never  be  transmuted  into  a  standard  of  value  any  more  than  an  opin- 
ion into  a  fact." — Standard  of  Value,  by  Lezvis  H.  Blair. 

f"The  argument  showing  impossibility  of  a  standard  of  value  has 
so  far  been  mainly  theory.  The  fact  of  the  impossibility  is  shown 
by  the  violent  antagonism  of  silverites  and  goldites,  each  school  tak- 
ing the  same  data,  and  one  school  proving  that  silver  has  remained 
stationary  and  gold  has  advanced,  and  the  other  school  proving  that 
gold  has  remained  stationary  and  silver  has  declined,  and  agreement 
is  impossible  because  the  contention  is  not  about  something  having 
fixed,  uniform  and  demonstrable  qualities,  but  about  a  sentiment,  an 
opinion,  a  state  of  mind  varying  with  time,  place,  individual  and  cir- 
cumstances. Better  attempt  a  standard  of  beauty  or  of  taste  or  of 
religion,  than  a  permanent  standard  of  value.  If  we  permitted  our- 
selves to  think,  we  would  soon  perceive  that  we  are  attempting  sun- 
beams from  cucumbers,  and  that  our  search  was  more  hopeless  than 
the  quest  of  the  Holy  Grail,  and  quite  as  hopeless  as  the  search  fo^ 

7 


9S  THF    NEW    PHILOSOPHY    OF    MONEY 

position  of  the  gold  standardites,  and  there  is  no  possible 
escape  from  the  same  evils  that  result  under  their  system  of 
money  if  we  are  only  to  change  the  "standard."  But  for- 
tunately we  shall  be  able  to  escape  these  evils,  as  there  is  no 
necessity  for  this  method  of  redemption  being  employed. 
ISIost  people  are  familiar  with  the  storekeeper's  money, 
"good  for  one  dollar  at  my  store";  "good  for  fifty  cents  at 
my  store";  "good  for  twenty-five  cents  at  my  store."  This 
money  (3-4)  was  not  redeemable  in  a  definite  quantity  of 
any  special  commodity.  It  is  true  this  money  circulated  only 
in  the  immediate  neighborhood  of  the  issuer,  but  that  was 
because  it  was  unsecured  credit  (9).  The  paper  money  pro- 
posed by  The  New  Philosophy  of  Money  will  be  secured 
credit,  and  it  must  be  admitted  the  one  bears  no  comparison 
to  the  other  on  that  score.  The  point  of  similarity  is  that 
neither  promise  a  definite  quantity  of  any  commodity  in 
exchange,  but  so  many  monetary  units  or  fractions  thereof  of 
any  commodity,  in  the  one  case,  that  the  storekeeper  had  for 
sale,  and  in  the  other,  that  any  of  the  borrowers  of  the 
Mutual  Credit  Associations  have  for  sale.  Who  ever  heard 
of  anyone  refusing  to  take  a  storekeeper's  promise  to  pay  in 
goods,  on  the  ground  that  it  did  not  state  a  definite  quantity 
of  any  particular  commodity  that  it  would  be  redeemed  in? 
The  only  objection  ever  raised  against  such  paper  money 
was  its  unreliability.  It  was  unsecured  credit.  The  mutual 
plan  remedies  this  difficulty  by  the  issue  of  secured  credit  in 
the  form  of  paper  money,  to  circulate  in  its  place.  The 
storekeeper's  promise  to  pay,  or  anybody's  promise  to  pay, 
together  with  the  security  required,  is  deposited  for  safe 
keeping  until  it  matures.  If  he  fails  to  pay  his  note,  the 
security  is  sold.     In  either  case,  an  equal  amount  of  the  same 


the  Fountain  of  Youth.  But  because  we  follow  in  the  beaten  track, 
we  still  pursue  with  heat  and  passion  not  only  one  impossibility, 
namely,  a  single  standard,  but  a  twofold  impossibility,  namely,  a 
double  standard  of  value — a  comedy  with  the  world  for  a  stage,  with 
statesmen  for  actors,  and  the  fun  at  the  expense  of  the  people." — 
Siandard  of  l''tilue,  by  Levjts  II.  Blair. 


MEASURE    OF    VALUE  99 

paper  money  must  come  into  the  possession  of  the  association 
that  furnished  it,  by  which  act  it  is  redeemed  and  retired 
from  circulation.  This  method  of  redemption  is  not  only  as 
effectual  as  redemption  by  the  "standard,"  but  it  is  practically 
applicable  to  every  dollar,  while  the  other  is  not;  and  it  is 
this  absolute  and  unavoidable  redemption;  redemption  from 
which  there  can  be  no  possible  escape,  that  will  make  its 
acceptance  much  more  desirable  than  the  other. 

204  But  let  us  still  further  consider  the  difference  between 
redemption  by  the  "standard  of  value"  plan  and  by  the 
Mutual  Credit  plan. 

205  In  order  to  redeem  under  the  "standard"  plan,  it  is 
necessary  to  have  a  sufficient  amount  (?)  of  the  one  thing 
that  is  said  to  constitute  the  "standard."  Under  the  Mutual 
Credit  plan  a  sufficient  amount  of  anything  that  has  market 
value  will  answer  the  purpose. 

206  Under  the  former  plan  it  is  necessary  to  acquire  and 
store  a  vast  amount  of  one  particular  commodity.  Either  the 
amount  must  be  equal  to  the  total  volume  of  paper  money, 
in  which  case  the  volume  of  money  must  be  limited  to  the 
quantity  of  that  commodity  that  is  obtainable,  or  the  risk 
must  be  incurred  that  the  demand  for  it  to  redeem  with  will 
be  greater  than  the  quantity  on  hand.  Under  the  latter  plan 
there  is  no  need  of  acquiring  and  storing  anything.  Each 
individual  takes  care  to  pay  his  note  when  it  becomes  due. 
If  he  has  the  money  it  is  because,  after  paying  it  out,  he  has 
taken  it  back  again  in  exchange  for  something  which  he 
sold.  This  act  of  taking  back  the  money  which  he  borrowed 
of  the  Mutual  Credit  Association,  and  which  he  had  pre- 
viously paid  out,  is  the  act  of  redemption  (244).  To  get  it 
he  had  to  give  market  value  for  it.  If  he  has  not  the  money, 
then  he  must  get  it  by  giving  market  value  for  it,  for  he  must 
pay  his  note;  and  in  paying  his  note  the  money  goes  back 
again  to  the  association. 

207  Now,  what  T  want  to  impress  upon  the  mind  of  the 
reader  is  the  fact  that,  since  this   borrower  of   the  Mutual 


lOO  THE    NEW    PHILOSOPHY    OF    MONEY 

Credit  Association  redeems  at  its  face  value  the  paper  money 
it  furnished  him,  it  is  no  less  effectual  redemption  because 
done  with  some  other  than  the  special  "standard"  commodit3\ 
He  must  give  full  market  value  for  it.  If,  then,  all  the 
paper  money  issued  by  the  association  must  be  redeemed 
everv  twelve  months  in  the  same  way,  why  is  it  not  a  vastly 
superior  method  of  redemption  to  that  of  the  gold  or  any 
other  "standard"  method? 

208  Is  the  fact  that  within  twelve  months  a  paper  dollar 
that  is  in  circulation  is  to  be  retired — withdrawn  from  circu- 
lation— by  some  party  who,  instead  of  issuing  it — paying  it 
out  again,  returns  it  to  the  association  in  payment  of  his  note 
that  has  become  due — is  this  fact  sufficient  to  make  it  accept- 
able money?     Can  there  be  any  possible  risk  in  taking  it? 

209  As  between  the  two,  which  money  is  the  safest — 
that  which  has  one  chance  in  several  in  being  redeemed,  or 
that  in  which  provision  is  made  for  the  redemption  of  every 
bill  within  twelve  months  of  its  issue?  In  the  one  case,  the 
paper  money  is  never  redeemed  except  when  an  individual 
takes  a  notion  to  demand  the  "standard"  for  it.  In  the  other, 
it  is  all  redeemed  every  twelve  months  without  anyone  both- 
ering himself  to  go  and  demand  something  for  which  he  has 
no  use. 

210  Finally,  let  us  come  to  the  real  issue  in  this  question 
of  a  "measure  of  value."  The  misapprehension  and  con- 
fusion that  befogs  the  minds  of  those  who  insist  on  the  "stand- 
ard of  value"  idea,  is  the  result  of  not  viewing  money  and  the 
denominator,  "dollar,"  separate  and  distinct  from  each  other.* 


*  "/«  other  ivot'ds,  the  coin  zvhich  represents  the  franc,  the  dollar,  the 
found,  is  an  entirely  different  thing  f -am  the  franc  itself,  or  the  found  or 
the  dollar.  In  the  discussion  of  the  financial  question  one  of  the 
greatest  stumbling  blocks  in  the  way  of  a  clear  understanding  of  the 
matter  is  the  fact  that  the  coin  which  represents  the  dollar  and  which 
in  common  phrase  is  called  a  'dollar'  is  confounded  with  the  dollar 
itself.  .  .  .  One  of  the  most  apt  illustrations  of  this  idea  is  that 
given  by  John  Stuart  Mill  when  he  tells  about  the  African  tribes 
who  calculate  (express)  the  value  of  things  by  the  term  'macute.' 
Thev  sav  such  a  thing  is  worth  a  'macute,'  another  is  worth  five 
'inacutes,'  and  another  ten,  and  so  on,  and  yet  there  is  no  such  real 


MEASURE    OF    VALUE  lOI 

Each  has  its  independent  function.  The  one  is  to  aid  and 
facilitate  the  distribution  of  wealth;  the  other  is  a  means  by 
which  we  can  express  more  or  less  value.* 

211  We  ask  the  price  of  a  commodity  and  w^e  get  the 
answer  in  dollars  and  cents — monetary  units  and  subdivisions 
— before  money  enters  into  the  transaction.  It  is  after  the 
price  has  been  agreed  upon  that  the  money  comes  into  play. 
There  are  two  distinct  operations — the  transmission  from  the 
seller  to  the  buyer  of  the  idea  of  the  value  of  the  object,  by 
the  former  expressing  its  price  in  the  conventional  monetary 
unit  and  its  subdivisions — dollars  and  cents.  This  is  one 
operation;  the  other  is  the  act  of  exchange,  the  buyer  hands 
to  the  seller  paper  money  equal  to  the  price  of  the  article,  in 
exchange  for  it.  The  dollar  with  which  we  express  more  or 
less  value  is  a  conventional  term,  an  abstraction.t  The  pa- 
per dollar  we  use  as  a  medium  of  exchange  is  secured  credit 
(  i6i  ).  In  the  two  operations  mentioned,  the  latter  does  not 
figure  in  the  first,  nor  the  former  in  the  second.  When  one 
only  inquires  the  price  of  an  article,  but  does  not  buy,  it  is 
not  the  paper  dollar  that  is  used  to  convey  the  answer,  but  the 
term — the  abstraction  we  call  "dollar."  Secured  credit  is 
divided  up  into  certificates  of  credit  of  all  denominations  and 
called  "one  dollar,"  "rwo  dollars,"  "five  dollars,"  and  so  on, 
to  correspond  with  the  denominator  or  abstract  dollar,  thus 
facilitating  settlement  of  transactions  by  the  transfer  of  this 


thing  as  a  'macute,'  and  probably  never   was   such  a  thing  in  exist- 
ence."—  Ten  Men  of  Money  Island. 

*"Money  and  the  yardstick  have  nothing  in  common.  The  yardstick 
is  an  exact,  unvarying  measure  of  length.  Money  is  an  uncertain,  var- 
iable measure  of  varying  values.  The  yardstick  is  not  bartered  for 
commodities.  .  .  .  The  yardstick  is  a  unit  of  length.  The  dollar  as 
a  "unit  of  value"  is  preposterous.  Our  Hamilton-Jefferson  statute, 
founding  the  mint,  provided  a  dollar  as  our  "unit  of  account." — Wm. 
P.  Sf.  yohn,  president  of  the  Mercantile  Natio7tal  Bank  of  New  Tork,  in 
sfatetnent  before  Committee  on  Banking  and  Currency,  December,  i8g4. 

■f-"The  dollar,  as  simple  measure  of  value,  has,  like  the  yard,  which 
is  a  measure  of  length,  an  ideal  existence,  only.  In  Naples,  the  ducat 
is  the  measure  of  value;  but  the  Neapolitans  have  no  specific  coin  of 
that  denomination." — Wm.  B.  Greene's  ''Mutual  Banking,''  j>agc  47. 


I03  THE    NEW    PHILOSOPHY     OF    MONEY 

secured  credit  instead  of  the  transfer  of  objects  of  value  (coin) 
or  paper  money  based  on  coin  onl}',*  It  is  for  the  reader  to 
determine  in  his  own  mind  whether  either  of  these  operations 
can  be  correctly  called  measuring  value.  The  reader  will 
no  doubt  find  interesting  the  following  controversy  on  this 
subject  between  the  editor  of  the  Galveston  Ne~Jos^  the  editor 
of  Liberty^  Mr.  Wm.  B.  DuBois,  and  the  writer. 


HOW    MUCH    CAN    BE    LOANED. 

YFroni  Galvcstott  ^Vcti',?.] 

212  Mr.  Alfred  B.  Westrup,  of  Chicago,  has  begun  the 
publication  of  a  paper  to  advocate  free  banking,  two  num- 
bers of  ^vhich  have  been  received.  Its  name  is  the  Aziditor^ 
and  it  is  published  at  343  Michigan  Avenue.  Mr.  Westrup 
appears  to  have  been  an  attentive  reader  of  the  Neivs^  from 
which  he  makes  liberal  extracts.  The  Auditor  is  opposed 
to  every  species  of  fiatism,  but  holds  that  the  owners  of  prop- 
erty have  a  moral  right  to  combine  and  do  a  banking  business 
subject  only  to  such  laws  as  are  a  protection  against  fraud 
and  dishonesty.     The  editor  of  the  Auditor  endorses  an  arti- 


*"But  we  will  notice  briefly  an  argument  presented  in  support  of 
the  proposition  that  the  unit  of  money  value  must  possess  intrinsic 
value.  The  argument  is  derived  from  assimilating  the  constitutional 
provision  respecting  a  standard  of  weights  and  measures  to  that  con- 
ferring the  power  to  coin  money  and  regulate  its  value.  It  is  said 
there  can  be  no  uniform  standard  of  weights  without  weight  or  a 
measure  without  length  or  space,  and  we  are  asked  how  anything 
can  be  made  a  uniform  standard  of  value  which  has  itself  no  value. 
This  is  a  question  foreign  to  the  subject  before  us.  The  legal  tender 
acts  do  not  attempt  to  make  a  paper  standard  of  value.  We  do  not 
rest  their  validity  upon  the  assertion  that  their  emission  is  coinage 
or  any  regulation  of  the  value  of  money,  nor  do  we  assert  that  Con- 
gress may  make  anything  which  has  no  value  money.  What  we  do 
assert  is,  that  Congress  has  power  to  enact  that  the  government's 
promise  to  pay  money  shall  be,  for  the  time  being,  equivalent  in 
value  to  the  representative  of  value  determined  by  the  coinage  act 
or  to  multiples  thereof.  It  is  hardly  correct  to  speak  of  a  standard 
of  value.  The  Constitution  does  not  speak  of  it.  It  contemplates  a 
standard  for  that  which  has  gravity  or  extension,  but  value  is  an 
ideal  thing.  The  coinage  act  fixes  its  unit  as  a  dollar,  but  the  gold 
or  silver  thing  we  call  a  dollar  is  in  no  sense  a  standard  of  a  dollar. 
It  is  a  representative  of  it." — Opinion  of  the  Supreme  Court,  United 
States  Legal  Tender  Cases;  12  Wallace,  S5^'3- 


MEASURE    OF    VALUE  IO3 

cle  from  the  uVcrus  on  a  standard  of  valuation,  but  still  in 
some  portions  of  his  writings  leaves  an  obscurity  hanging 
over  his  position  in  discussing  the  "standard  of  value"  and 
"unit  of  value."  The  point  which  presents  itself  for  resolu- 
tion is  not  covered  by  saying  that  promises  of  dollars  are 
accepted  on  an  understanding,  Tlie  present  understanding 
as  to  a  dollar  is  so  much  gold  or  silver  or  paper  which  is  so 
limited  that  it  is  sure  to  circulate  at  par  with  coin.  If  issues 
of  paper  were  larger  the  inquiry  would  be  considerable 
sharper:  "what  is  a  dollar?"  for  the  paper  dollar  is  practi- 
cally nothing  but  what  it  guarantees.  And  one  can  not  pay 
even  loi  with  loo,  wherefore  when  bank  paper  is  lent  at 
any  interest,  however  low,  the  interest  should  be  payable  in 
something  else  than  that  paper.  Some  paper  is  always  lost. 
That  should  be  repaid  in  something  agreed  upon.  There 
come  two  men  to  borrow,  and  if  one  gets  $1,000  on  certain 
security,  by  what  rule  shall  his  neighbor  get  $1,200  and 
neither  more  or  less  on  other  security?  The  JVcws  has 
explained  by  having  an  agreed  standard  for  valuation,  and  it 
means  no  more  or  less  by  a  standard  of  value.  Whenever 
government  issues  are  inflated  and  uncertain  the  "understand- 
ing" of  the  word  dollar  becomes  too  vague  for  dependence  to 
be  placed  on  it,  and  in  mutual  banking  no  note-holder  wants 
a  future  borrower  to  get  the  issues  at  a  more  liberal  rate  with 
regard  to  property  pledged  than  the  earlier  borrowers  have 
got  and  used  them  at,  for  that  would  mean  depreciation. 
Such  a  result  is  to  be  prevented  by  agreeing  upon  a  standard 
for  valuation,  and  let  not  this  be  confused  with  means  of  pay- 
ment. The  means  of  payment  are  the  note  itself  and  what 
it  will  bring,  but  there  must  be  some  thing  or  things  uni- 
formly referred  to  in  determining  how  much  shall  be  loaned. 
To  refer  to  the  bank-notes  themselves  might  lead  to  limitless 
inflation  and  a  very  variable  relation  between  the  expanding 
sum  of  notes  and  the  comparatively  fixed  sum  of  real  things, 
which  relation  would  in  a  while  cause  two  or  more  notes  to 
go  in  exchange  where  one  had  gone  befoi'e,  giving  those 
who  hold  any  money  to  see  that  by  holding  it  they  had  lost 
purchasing  power.  The  Auditor  should  not  fear  to  adhere 
to  a  material  standard,  simple  or  complex,  for  uniform  valu- 
ations and  still  insist  upon  utmost  extension  of  the  represent- 
ative medium  or  media. 

213     There  seems  to  have  been  an  unaccountable  tendency 
to  overlook  the  fact  that  in  the  system   I  advocate,  provision 


I04  THE    NEW    PHILOSOPHY    OF    MONEY 

is  made  for  the  redemption  of  every  dollar  of  money  issued, 
at  its  face  value,  in  commodities  at  their  market  value;  and 
that  this  fact  v\' ill  insure  its  circulation,  because  it  establishes 
its  exchangeable  value.  In  answer  to  the  foregoing  article, 
I  called  the  attention  of  the  News  to  the  following  extract 
from  "The  Financial  Problem,"  which  I  reproduced  in  the 
A.udito7'. 

214  "Let  us  suppose  a  community  where  there  is  only 
one  bank,  and  that  each  individual  in  that  community  secures 
an  account  current  by  depositing  collateral  to  a  greater  or 
less  extent  with  the  bank.  Is  it  not  clear  that  in  such  a  sys- 
tem of  payments,  no  money  would  be  needed,  every  individ- 
ual would  pay  by  check;  the  accounts  being  adjusted  by  off- 
setting on  the  books  of  the  bank;  the  monetary  unit  we  call 
"dollar"  answering  the  purpose  of  a  conventional  denomi- 
nator or  denominant.  We  will  also  suppose  that  this  bank  is 
conducted  on  the  mutual  plan,  and  therefore  charges  are 
made  to  cover  cost  only.  Gold  and  silver  bullion,  like  any 
suitable  commodity,  could  be  used  as  collateral,  but  no  coin 
would  be  necessary  and  none  would  be  used.  It  would  there- 
fore seem  to  be  sufficiently  clear  that  a  unit  to  act  as  a  meas- 
ure or  standard  of  value  is  but  a  fiction,  a  fetish.  It  is 
admitted  that  the  proposed  bank,  for  various  reasons,  would 
be  an  impracticable  method  of  effecting  exchanges,  but  the 
absence  of  a  coin-unit-measure-standard  would  not  be  one  of 
them.  Not  every  one  can  have  a  bank  account.  The  incon- 
venience of  paying  small  amounts  by  checks  as  well  as  the 
uncertainty  in  many  instances,  as  to  the  acceptability  of 
checks  at  the  bank  are  insurmountable  difficulties,  but  one 
can  hardly  contemplate  the  foregoing  and  at  the  same  time 
conceive  how  the  advocates  of  a  coin  basis  to  paper  money 
would  defend  their  theory  of  its  necessity.  It  is  not  difficult 
to  comprehend  the  nature  of  the  error  here  fallen  into. 

215  "A  monetary  unit  (a  conventional  denominator  or 
denominant)  to  facilitate  the  expressing  of  amounts  in  the 
realm  of  value,  is,  apparently,  so  similar  in  its  function  to 
that  of  the  units  employed  in  physics,  such  as  the  inch,  the 
pound,  etc.,  especially  as  certain  coin  is  made  legal  tender, 
that  the  notion  has  become  well  nigh  universal  that  this 
monetary  unit  must  be  a  definite  quantity  of  some  commod- 
itv  just  as  the  inch  is  a  definite  anJ.  unvarying  length,  or  the 


MEASURE    OF    VALUE  I05 

pound  is  a  definite  nntl  unvarying  weight;  but  this  notion  is 
utterly  devoid  of  reason.* 

216  "As  there  is  nothing  definite  or  permanent  in  vahie 
a  unit  of  vakie  is  a  physical  impossibility. 

217  "The  monetary  unit  is  as  near  a  unit  or  measure  of 
value  as  the  "x"  in  an  algebraic  equation  is  a  known  quan- 
tity. You  can  ascertain  the  exchangeable  value  of  a  gold 
dollar  in  any  commodity  by  inquiring  the  price  of  that  com- 
modity; so  also  you  can  find  the  quantity  "x"  by  ciphering 
out  the  equation. 

218  "The  value  of  the  gold  dollar  varies  with  every 
change  in  market  price,  just  as  the  quantity  "x"  differs  with 
every  change  in  the  equation. 

219  "The  gold  dollar  is  a  certain  quantity  of  gold.  It  is 
not  the  gold,  however,  but  the  value  of  the  gold  that  is  sup- 
posed to  do  the  measuring,  and  it  is  the  value  of  the  gold  that 
is  the  uncertain  quantity. 

220  "How  can  an  uncertain  quantity  he  a  unit  of  meas- 
u-re?  And  if  it  is  not  a  measure,  what  is  the  object  of  a  coin 
basis?  If  it  is  answered  that  it  is  not  a  measure  but  a  "stand- 
ard" of  value,  if  by  "standard"  is  meant  denominant,  then 
the  use  of  the  term  "standard"  is  equivocal,  and  therefore 
sophistical  or  dishonest.  If  it  is  claimed  that  it  is  more  than 
a  denominant,  there  is  no  escaping  the  dilemma  that  con- 
fronts the  paragram  "measure." 

221  "When  paper  money  is  issued  as  proposed  by  the 
Mutual  Bank  Propaganda,  with  ample  security  but  not  legal 
tender  nor  redeemable  in  any  special  commodity,  the  mone- 
tary unit  dollar  will  simply  be  a  denominant.  Its  purchasing 
power  will  not  be  affected  by  a  rise  or  fall  in  the  price  of  any 
commodity  any  more  than  an  order  for  a  pound  of  butter 
commands  more  than  a  pound  at  one  time  and  less  at  another. 
The  mutual  bank  paper  dollar  will  buy  more  butter  at  one 
time  than  another,  but  this  will  take  place  in  consequence  of 
tlie  operation  of  supply  and  demand  in  regard  to  butter  onlv ; 
and  so  with  regard  to  all  other  commodities;  the  mutual 
bank  paper  money  will  have  no  more  effect  on  the  price  of 
commodities  than  the  order  for  the  butter  will  affect  the  price 
of  butter  (35S-359),  whereas  when  the  monetary  unit  is  a 
legal  tender  commodity  dollar,  variations  in  the  price  of  any 
commodity  are  affected,  not  only  by  supply  and  demand  in 


*  See  foot-note  page  94. 


To6  THE    NEW    PHILOSOPHY    OF    :M0XEY 

that  particular  commodity,  but  also  "supply  and  demand"  in 
the  arbitrarily  limited  legal-tender-commodity-dollar,  -which 
limit  enables  a  class  to  own  and  control  it,  the  scarcity  or 
abundance  of  which  (dependent  upon  combinations  among 
this  class)  must  affect  the  price  of  all  other  commodities. 
Under  any  system,  therefore,  which  recognizes  any  special 
commodity  as  a  legal  tender  basis  for  its  paper  money,  es- 
pecially as  that  commodity  must  necessarily  be  one  that  is 
limited  by  nature,  fluctuations  in  prices  become  complicated  by 
complex  causes,  resulting  from  the  limitations  to  credit 
through  this  control  of  money.  No  such  effect  can  occur 
under  the  Mutual  Credit  System,  the  volume  of  money 
being  unlimited  except  by  the  quantity  of  collateral  offered, 
and  the  rate  of  interest  beinsr  the  same  to  all  borrowers." 


THE    STANDARD    OP'    VALUE. 
To  the  Editor  oj  the  Auditor: 

222  I  have  given  considerable  thought  to  the  money 
question,  and  here  are  my  conclusions  in  regard  to  the  "dol- 
lar" and  the  much  discussed  "standard  of  value."  The  dollar 
is,  or  should  be  under  a  just  and  scientific  monetary  system, 
merely  an  abstract  idea.  No  one  commodity  can  be  made 
an  absolute  unchanging  standard  by  which  to  effect  ex- 
changes of  other  commodities,  for  the  reason  that,  owing  to 
fluctuations  in  supply  and  demand,  there  is  no  one  commod- 
ity of  which  a  given  quantity  and  quality  will  always 
exchange  for  the  same  quantity  and  quality  of  any  other  com- 
modity. 

223  The  scientific  basis  for  money  is  labor,  and  its  only 
honest  use  consists  in  exchanging  the  products  or  results  of 
labor.  Labor,  therefore,  is  the  nearest  approach  to  a  "stand- 
ard," but  it  is  not  a  fixed  one,  for  the  reason  that  even  labor 
varies  in  supply  and  demand,  in  application  and  in  results. 

224  It  is  not  necessary  to  have  a  fixed  or  even  an  approx- 
imate standard  of  value;  it  is  only  necessary  to  have  a  unit. 
In  our  country  the  dollar  is  that  unit.  But  for  the  sake  of  ex- 
ample let  us  use  the  algebraic  symbol  x,  and  see  how  it  works 
itself  out  in  the  regulation  of  prices.  Let  us  bear  in  mind,  in 
the  first  place,  that  the  real  cost  of  a  thing  is  the  labor  it  takes 
to  produce  that  thing.       Then,  we  will  assume  that  the  aver- 


MEASURE    OF    VAI.UE 


107 


age  daily  wages  of  labor  is  2\,  and  that  it  costs  on  the  aver- 
age to  produce  to  the  consumer: 

Days  Labor 

I  bushel  of  wheat,       -  -  -  -    i^^ 

I  barrel  potatoes,     -  -  .  -  i 

I  barrel  flour,      -         -         -  -  -     2 

I  pair  boots,     -----  3 

I  suit  of  clothes,  -  -  -  -    10 

I  horse,  -----        50 

I  piano,       -  -  -  -  -  100 

I  locomotive,  ....  1,000 

The  prices  of  these  various  articles  will  then  be  as  follows: 
I  bushel  of  wheat,     -  -  -  -      ix 

I  barrel  potatoes,  -  -  -  2x 

I  barrel  flour,  -  -  -  -     4^ 

I  pair  boots,  -  -  -  -  6x 

I  suit  of  clothes,         .         .  .  .  20X 

I  horse,         .  .  .  .  .       loox 

I  piano,     .....  200X 

I  locomotive,         ....  2,ooox 

And  these  prices  will  vary  according    as  the  average  daily 

wages  of  labor  varies  and  according  to  supply  and  demand. 

It  seems  to  me  that  this  is  the  root  of  the  whole    matter  and 

all  there  is  to  the  "standard  of  value." 

Wm.  B.  DuBois. 

Bayonne,  N.  J.,  August  14,  1S91. 


A    STANDARD    OF    VALUE    A    NECESSITY. 

[Liier^y,  June  jj,  /Sg/.] 

225  Readers  of  Liberty  will  remember  an  article  in  num- 
ber 1S4  on  "The  Functions  of  Money,"  reprinted  from  the 
Galveston  News.  In  a  letter  to  the  News  I  commented 
upon  this  article  as  follows:  "I  entirely  sympathize  with 
your  disposal  of  the  Evening  Posfs  attempt  to  belittle  the 
function  of  money  as  a  medium  of  exchange;  but  do  you  go 
far  enough  v>hen  you  content  yourself  with  saying  that  a 
standard  of  value  is  highly  desirable?  Is  it  not  absolutely 
necessary?  Is  money  possible  without  it?  If  no  standard  is 
definitely  adopted,  and  then  if  paper  money  is  issued,  does 
not  the  first  commodity  that  the  first  note  is  exchanged  for 


loS  THE    NEW    PHILOSOPHY    OF    MONEY 

immediately  become  a  standard  of  value?  Is  not  the  second 
holder  of  the  note  governed  in  making  his  next  purchase  by 
what  he  parted  with  in  his  previous  sale?  Of  course  it  is  a 
very  poor  standard  that  is  thus  arrived  at,  and  one  that  must 
come  in  conflict  with  other  standards  adopted  in  the  same 
indefinite  way  by  other  exchanges  occurring  independently 
but  almost  simultaneously  with  the  first  one  above  supposed. 
But  so  do  gold  and  silver  come  in  conflict  now.  Doesn't  it 
all  show  that  the  idea  of  a  standard  is  inseparable  from 
money?  Moreover,  there  is  no  danger  in  a  standard.  The 
whole  trouble  disappears  with  the  abolition  of  the  basis 
privilege." 

2:26  The  Nexvs  printed  tny  letter  and  made  the  following 
rejoinder:  "It  will  occur  that  in  emphasizing  one  argument 
there  is  such  need  of  passing  others  by  with  seeming  uncon- 
cern that  to  some  minds  other  truths  seem  slighted, — truths 
which  also  need  emphasizing  perhaps  in  an  equal,  or  it  may 
be,  for  useful  practical  reasons,  in  a  superior  degree.  The 
JVezus  aims  at  illustrating  one  thing  at  a  time,  but  it  is  both 
receptive  and  grateful  to  those  correspondents  who  intelli- 
gently extend  its  work  and  indicate  useful  subjects  for  dis- 
cussion, giving  their  best  thought  thereon.  A  Boston  reader, 
speaking  of  the  standard  of  value,  states  an  undeniable  truth 
to  the  effect  that  without  a  thing  or  things  of  value  to  which 
paper  money  can  be  referred  and  which  can  ultimately  be 
got  for  it,  such  money  would  be  untrustworthy  or  worthless. 
The  News  in  a  past  article  was  discussing  primary  com- 
merce and  the  transition  to  indirect  exchange.  No  agreed 
standard  for  valuation  is  needed  while  mere  barter  is  the  rule; 
but  it  is  indispensable  as  soon  as  circulating  notes  are  issued. 

227  "The  vice  of  the  greenback  theory  is  that  the  notes 
do  not  call  for  anything  in  particular,  and  so,  if  their  volume 
be  doubled,  their  purchasing  power  must  apparently  decline 
one-half.  A  note  properly  based  on  gold,  silver,  wheat,  cot- 
ton, or  other  commodity  has  a  tangible  security  behind  it. 
The  one  thing  may  be  better  than  the  other,  but  the  princi- 
ple is  there  in  all.  It  is,  however,  a  notable  truth  that  the 
standard  of  valuation  can  be  nothing  better  than  an  empirical 
one.  Like  mathematical  quantities,  value  has  no  independ- 
ent existence,  but,  unlike  mathematical  quantities,  value  has 
not  even  existence  as  a  quality  of  one  object.  It  cannot  be 
compared  to  a  measure  of  length,  which  possesses  the  quality 
of  extension  in  itself.     Gold  is  assumed  to  vary  little  in  rela- 


MEASUKE    OK    VAl.VE 


109 


tion  to  other  things,  and  they  to  vary  much  in  relation  to 
gold  Nobody  can  know  how  much  gold  does  vary  in  the 
relation.  The  notable  steadiness  is  in  the  amount  of  labor 
which  will  produce  a  given  quantity  and  the  length  of  time 
which  it  will  last.  The  basis  of  the  assumed  steadiness  of 
gold  is  thus  found.  But  if  the  standard  for  vise  in  making 
valuations  be  confessedly  empirical  and  value  an  elusive 
quality  not  of  things  separately,  but  of  things  in  relation, 
there  is  a  countervailing  difference  between  a  standard  of 
length  and  a  standard  of  value,  which  results  in  disposing  of 
the  objection  that  the  standard  is  empirical.  Why  would  it 
be  a  serious  objection  to  a  yardstick  if  it  were  longer  or 
shorter  from  day  to  day?  Because  thus  the  customer  would 
get  more  or  less  cloth  than  was  intended.  But  why  is  that? 
Because  the  function  of  the  yardstick  is  to  measure  for  deliv- 
ery as  great  a  length  of  cloth  as  its  own  length.  But  now 
let  us  visit  a  bank  or  insurance  office.  We  want  a  loan  of 
circulating  notes  or  a  policy  of  insurance.  The  property 
offered  as  security  is  valued.  Assume  that  gold  is  taken  as 
the  standard,  and  that  the  loan  or  the  policy  is  for  $600  on 
a  valuation  of  $1,000.  It  is  no  matter  in  these  cases  if  the 
standard  varies,  provided  it  does  not  vary  to  exceed  the  mar- 
gin between  the  valuation  and  the  obligation.  The  projoerty 
pledged  is  merely  security  for  the  loan,  or,  in  the  case  of 
insurance,  the  premium  paid  is  a  per  cent  of  the  amount 
insured.  The  margin  between  the  valuation  and  the  loan  is 
established  to  make  the  loan  abundantly  safe.  The  policy  is 
safely  written  through  the  same  expedient.  The  empirical 
standard  of  value  has  a  needful  compensation  about  it  which 
the  yardstick  or  other  measure  neither  has  nor  needs, — 
namely,  the  valuing  goods  does  not  deliver  them.  It  is  pro- 
visional. In  case  of  default  in  paying  back  the  loan,  the 
goods  are  sold  and  the  same  money  borrowed  is  paid  back, 
but  the  residue  goes  to  the  borrower.  It  is  therefore  an  effi- 
cient compensation  for  the  lack  of  an  invariable  standard  of 
value  that  the  actual  standard  in  any  case  is  simply  used  as  a 
means  of  estimating  limits  within  which  loans  are  safe.  All 
danger  is  avoided  by  giving  the  borrower  the  familiar  right 
in  case  of  foreclosure.  It  is  sometimes  a  fine  thing  to  dis- 
cover distinctions,  but  it  is  frequently  a  finer  thing  to  discover 
whether  or  not  the  distinctions  affect  the  question," 

228     While   not   hesitating  for  a  moment   to    accept  the 
JVews''  explanation   that,   when   hinting    that  a  standard  of 


no  THE    NEW    PHILOSOPHY    OF    MONEY 

value  is  not  indispensable,  it  was  speaking  of  barter  only,  I 
may  point  out  nevertheless  that  there  was  a  slip  of  the  pen, 
and  that  the  words  actually  used  conveyed  the  idea  that 
something  more  than  barter  was  in  view.  Let  me  quote 
from  the  original  article: 

229  "It  is  manifest  that  a  medium  of  exchange  is  abso- 
lutely necessary  to  all  trade  beyond  barter.  A  standard  of 
value  is  highly  desirable,  but  perhaps  this  is  as  much  as  can 
be  safely  asserted  on  that  question." 

230  It  seems  to  me  a  fair  interpretation  of  this  language 
to  claim  the  meaning  that  in  trade  beyond  barter  it  is  not 
sure  that  a  standard  of  value  is  absolutely  necessary.  And 
this  interpretation  receives  additional  justification  when  it  is 
remembered  that  the  words  were  used  in  answer  to  the 
EveniJig  Posfs  contention  that,  in  comparing  the  two  func- 
tions of  money,  its  office  of  medium  of  exchange  must  be 
held  inferior  to  its  office  of  measuring  values. 

231  However,  the  News  now  makes  it  sufficiently  clear 
that  a  standard  of  value  is  absolutely  essential  to  money, 
thereby  taking  common  ground  with  me  against  the  position 
of  comrade  Westrup.  Still  I  caimot  quite  agree  to  all  that 
it  says  in  comment  upon  the  Westrup  view. 

232  First,  1  question  its  admission  that  a  measure  of  value 
differs  from  a  measure  of  length  in  that  the  former  is  empir- 
ical. True,  value  is  a  relation;  but  then,  what  is  extension? 
Is  not  that  a  relation  also, — the  relation  of  an  object  to  space? 
If  so,  then  the  yardstick  does  not  possess  the  quaHty  of  exten- 
sion in  itself,  being  as  dependent  for  it  upon  space  as  gold  is 
dependent  for  its  value  upon  other  commodities.  But  this  is 
metaphysical  and  may  lead  us  far;  therefore  I  do  not  insist, 
and  pass  on  to  a  more  important  consideration. 

233  Second,  I  question  whether  the  News'  "countervail- 
ing difference  between  a  standard  of  length  and  a  standard  of 
value"  establishes  all  that  it  claims.  In  the  supposed  case  of 
a  bank  loan  secured  by  mortgage,  the  margin  between  the 
valuation  and  the  obligation  practically  secures  the  note- 
holder against  loss  from  a  decline  in  the  value  of  the  security, 
but  it  does  not  secure  him  against  loss  from  a  decline  in  the 
value  of  the  standard,  or  make  it  impossible  for  him  to  profit 
by  a  rise  in  the  value  of  the  standard.  Suppose  that  a 
farmer,  having  a  farm  worth  $5,000  in  gold,  mortgages  it  to 
a  bank  as  security  for  a  loan  of  $2,500  in  notes  newly  issued 
by  the  bank  against  this  farm.      With  these  notes  he  pur- 


MEASURE    OF    VALUE  III 

chases  implements  from  a  manufacturer.  When  the  mort- 
gage expires  a  year  later,  the  borrower  fails  to  lift  it.  Mean- 
while gold  has  declined  in  value.  The  farm  is  sold  under  the 
hammer,  and  brings,  instead  of  $5,000  in  gold,  $6,000  in 
gold.  Of  this  sum,  $2,500  is  used  to  meet  the  notes  held  by 
the  manufacturer  who  took  them  a  year  before  in  payment  for 
the  implements  sold  to  tlie  farmer.  Now,  can  the  manu- 
facturer buy  back  his  implements  with  $2,500  in  gold? 
Alanifestly  not,  for  by  the  hypothesis  gold  has  gone  down. 
Why,  then,  is  not  this  manufacturer  a  sufferer  from  the  vari- 
tion  in  the  standard  of  value,  precisely  as  the  man  who  buys 
cloth  with  a  short  yardstick  and  sells  it  with  a  long  one  is  a 
sufferer  from  the  variation  in  the  standard  of  length?  The 
claim  that  a  standard  of  value  varies,  and  inflicts  damage  by 
its  variations,  is  perfectly  sound;  but  the  same  is  true,  not 
only  of  the  standard  of  value,  but  of  every  valuable  commod- 
ity as  well.  Even  if  there  were  no  standard  of  value  and 
therefore  no  money,  still  nothing  could  prevent  a  partial  fail- 
ure of  the  wheat  crop  from  enhancing  the  value  of  every 
bushel  of  wheat.  Such  evils,  so  far  as  they  arise  from  nat- 
ural causes,  are  in  the  nature  of  inevitable  disasters  and  must 
be  borne.  But  they  are  of  no  force  whatever  as  an  argu- 
ment against  the  adoption  of  a  standard  of  value.  If  every 
yardstick  in  existence,  instead  of  constantly  remaining  thirty- 
six  inches  long,  were  to  vary  from  day  to  day  within  the 
limits  of  thirty-five  and  thirty-seven  inches,  we  should  still  be 
better  off  than  with  no  yardstick  at  all.  But  it  would  be  no 
more  foolish  to  abolish  the  yardstick  because  of  such  a  defect 
than  it  would  be  to  abolish  the  standard  of  value,  and  there- 
fore money,  simply  because  no  commodity  can  be  found  for 
a  standard  which  is  not  subject  to  the  law  of  supply  and 
demand. 


A    NECESSITY    OR    A    DELUSION, WHICH? 

[Liieriy,  June  2j,  fSg/.] 

To  tlic  Editor  of  Liberty  : 

234  It  is  not  only  a  delusion,  but  a  misuse  of  language,  to 
talk  of  a  "standard  of  value."  Give  us  a  standard  of  pain  or 
pleasure,  and  vou  mav  convince  us  that  there  can  be  a 
"standard  of  value."       I  am  well  aware  of  the  difficulty  of 


112  THE    NEW    PHILOSOPHY    OF    MONEY 

discussing  this  question,  even  with  so  precise  an  editor  as 
Mr.  Tucker;  but  since  he  has  called  in  question  the  views 
presented  in  my  pamphlet  (The  Financial  Problem),  I  feel 
called  upon  to  lay  before  the  readers  of  Liberty  some  addi- 
tional arguments  to  show  the  correctness  of  what  Mr.  Tucker 
has  honored  me  by  calling  "the  Westrup  view." 

235  Let  us  consider  for  a  moment  the  practical  workings 
of  a  mutual  bank,  as  near  as  we  can  foretell  them.  The 
incentive  to  organize  a  mutual  bank  is  the  opportunity  of 
borrowing  money  at  a  very  low  rate  of  interest  and  no  addi- 
tional expense.  This  desideratum  is  not  confined  to  a  few 
individuals,  but  is  well  nigh  universal.  It  follows,  therefore, 
that  the  starting  of  a  bank  will  draw  to  it  a  large  number  of 
people,  embracing  producers  and  dealers  in  almost,  perhaps 
all,  commodities.  One  of  the  conditions  in  obtaining  the 
notes  (paper  money)  of  the  mutual  bank  is  that  they  will  be 
taken  in  lieu  of  current  money  without  variation  in  the  price 
of  the  commodities,  by  those  who  borrow  them.  This  con- 
dition is  just,  and  will  be  readily  acquiesced  in  without  a 
murmur.  At  the  very  outset  of  the  mutual  bank,  then,  we 
have  at  least  dealers  in  most  of  the  ordinary  commodities  who 
will  accept  this  money.  This  certainty  of  its  redemption  in 
commodities  at  their  market  price  in  current  money  guaran- 
tees its  circulation. 

236  Strictly  speaking,  the  mutual  bank  does  not  issue  the 
money;  it  simply  furnishes  it  and  is  the  custodian  of  the  col- 
lateral pledged  to  insure  its  return.  It  is  the  borrowers  who 
both  issue  and  redeem. 

237  The  transaction  between  the  bank  and  the  borrower 
is  of  no  interest  to  the  public  previous  to  the  issue  of  an}'  of 
the  money  by  the  borrower.  Neither  is  it  concerned  with 
the  transaction  between  the  borrower  and  the  bank  after  the 
former  has  redeemed  all  the  money  he  borrowed. 

23S  Discussing  theories  is  far  less  important  than  efforts 
to  put  in  practice  such  momentous  reforms  as  the  application 
of  the  mutual  feature  to  the  supply  of  the  medium  of  ex- 
change. If  comrade  Tucker  really  desires  the  establishment 
of  mutual  banks,  it  seems  to  me  he  would  naturally  discuss 
the  practicability  of  such  institutions.  Let  him  point  out 
wherein  the  above  forecast  is  unsound.  Let  him  show  the 
necessity  for  a  "standard  of  value"  and  suggest  how  to  intro- 
duce one;  perhaps  I  may  become  converted.  I  shall  most 
surely  acknowledge  my  error  if  I  am  convinced,  but  I  have 


MEASURE    OF    VALUE  II3 

no  time  oi-  inclination  to  discuss  any  abstract  theory  about  a 
"standard  of  value."  The  one  question  that  seems  to  me  of 
importance  is  the  practicability  of  the  mutual  bank.  If  it  is 
not  practicable,  why  is  it  not  so?  If  it  is,  why  waste  time 
and  space  in  discussing  whether  the  first  or  the  second  or  any 
other  commodity  exchanged  becomes  the  "measure"  or 
"standard"  of  value;  especiall}'  as  "the  whole  trouble  disap- 
pears with  the  abolition  of  the  basis  privilege  " 

Alfred  B.  Westrup. 

239  Mr.  Westrup's  article  sustains  in  the  clearest  manner 
my  contention  that  money  is  impossible  without  a  standard 
of  value.  Starting  out  to  show  that  such  a  standard  is  a 
delusion,  he  does  not  succeed  in  writing  four  sentences 
descriptive  of  his  proposed  bank  before  he  adopts  that  "delu- 
sion." He  tells  us  that  "one  of  the  conditions  in  obtaining 
the  notes  (paper  money)  of  the  mutual  bank  is  that  they  will 
be  taken  in  lieu  of  cicrrcni  moneys  What  does  this  mean? 
Why,  simply  that  the  patrons  of  the  bank  agree  to  take  its 
notes  as  the  equivalent  of  gold  coin  of  the  same  face  value. 
In  other  words,  they  agree  to  adopt  gold  as  a  standard  of 
value.  They  will  part  with  as  much  property  in  return  for 
the  notes  as  they  w^ould  part  with  in  return  for  gold.  And 
if  there  were  no  such  standard,  the  notes  would  not  pass  at 
all,  because  nobody  would  have  any  idea  of  the  amount  of 
property  that  he  ought  to  exchange  for  them.  The  fiaivete 
with  which  Mr.  Westrup  gives  away  his  case  shows  tri- 
umphantly the  puerility  of  his  raillery  at  the  idea  of  a  stand- 
ard of  value. 

340  Indeed,  comrade  Westrup,  I  ask  nothing  better  than 
to  discuss  the  practicability  of  mutual  banks.  AH  the  work 
that  I  have  been  doing  for  libert}'  these  nineteen  years  has 
been  directed  steadily  to  the  establishment  of  the  conditions 
that  alone  will  make  them  practicable.  I  have  no  occasion 
to  show  the  necessity  for  a  standard  of  value.  Such  neces- 
sity is  already  recognized  by  the  people  whom  we  are  tr3'ing 
to  convince  of  the  truth  of  mutual  banking.  It  is  for  you, 
w'"-©  deny  this  necessity,  to  give  your  reasons.  And  in  the 
very  moment  in  which  you  undertake  to  tell  us  why  you  deny 
it,  you  admit  it  without  knowing  it.  It  would  never  have 
occurred  to  me  to  discuss  the  abstract  theory  of  a  standard  of 
value.  I  regard  it  as  too  well  settled.  But  when  you,  one 
of  the  most  conspicuous  and  faithful  apostles  of  mutual  bank- 


TI4  THE    NEW    PHILOSOPHY    OF    MONEY 

ing,  begin  to  bring  the  theory  into  discredit  and  ridicule  by 
basing  your  arguments  in  its  favor  on  a  childish  attack 
against  one  of  the  simplest  of  financial  truths,  I  am  as  much 
bound  to  repudiate  your  heresy  as  an  engineer  would  be  to 
disavow  the  calculations  of  a  man  who  should  begin  an 
attempt  to  solve  a  difficult  problem  in  engineering  by  deny- 
ing the  multiplication  table. 

241  I  fully  recognize  Mr.  Westrup's  faithful  work  for 
freedom  in  finance  and  the  ability  with  which  he  often 
defends  it.  In  fact,  it  is  my  appreciation  of  him  that  has 
prevented  me  from  criticising  his  error  earlier.  I  did  not 
wish  to  throw  any  obstacle  in  the  path  or  in  any  way 
dampen  the  enthusiasm  of  this  ardent  propagandist.  But 
when  I  see  that  admirable  paper,  Egoism^  of  San  Francisco, 
putting  forward  those  writings  of  Mr.  Westrup  which  con- 
tain the  objectionable  heresy ;  and  when  I  see  that  other 
admirable  paper,  The  Herald  of  Anarchy^  of  London,  led 
by  his  or  similar  ideas  to  advocate  the  issue  of  paper  bearmg 
on  its  face  the  natural  prices  of  all  commodities  (!);  and 
when  I  see  individualists  holding  Anarchism  responsible  for 
these  absurdities  and  on  the  strength  of  them  making  effect- 
ive attacks  upon  a  financial  theory  which,  when  properly 
defended,  is  invulnerable, — it  seems  high  time  to  declare  that 
the  free  and  mutual  banking  advocated  by  Proudhon,  Greene, 
and  Spooner  never  contemplated  for  a  moment  the  desirabil- 
ity or  the  possibility  of  dispensing  with  a  standard  of  value. 
If  others  think  that  a  standard  of  value  is  a  delusion,  let 
them  say  so  by  all  means;  but  let  them  not  say  so  in  the 
name  of  the  financial  theories  and  projects  which  the  original 
advocates  of  mutual  banking  gave  to  the  world. 


242  I  have  endeavored  all  through  this  lengthy  conten- 
tion for  what  is  sound  and  logical  in  regard  to  the  exchange- 
ability of  paper  money,  to  be  fair  in  presenting  the  position 
of  those  who  differ  from  me  on  this  question;  and  that  the 
reader  may  be  able  to  judge  impartially  as  to  the  correct  view, 
I  have  reproduced  entire  articles,  instead  of  extracts.  Mr. 
Tucker  replies  to  my  statement  (203)  namely,  that  mutual 
money  will  circulate  freely  because  borrowers  bind  themselves 
to  take  it  in  exchange  for  commodities,  ine  same  as  they  do 


MEASURE    OF     VALUE  II5 

current  monev,  "that  the  patrons  of  the  bank  agree  to  take 
its  notes  as  the  ec^uivalent  of  gold  coin  of  the  same  face  vahie. 
In  other  words,  they  agree  to  adopt  gold  as  a  standard  of 
value."  But  how  does  he  reconcile  his  theory  with  the  fact 
admitted  in  his  controversy  with  ]Mr,  Fisher?  ("Instead  of 
a  Book,"  page  233.)  "The  value  of  gold  would  be  reduced 
by  mutual  banking,  because  it  would  thereby  be  stripped  of 
that  exclusive  monetary  utility  conferred  upon  it  by  the  State 
(199-200).  The  percentage  of  this  reduction,  no  one  can 
tell  in  advance."  And  how  does  he  reconcile  the  above  with 
the  following  which  he  quotes  from    Col.  Greene?     "IMuT- 

UAI.  MONEY  IS  ^rEASURED  I5Y  SPECIE,  BUT  IS  IN  NO  WAY 
ASSIMILATED  TO  If;  AND  THEREFORE,  ITS  ISSUE  CAN 
HAVE  NO  EFFECT  WHATEVER  TO  CAUSE  A  RISE  OR  FALL 
IN  THE   PRICE  OF    THE    PRECIOUS    METALS."         He    UOt    Only 

quotes  it  approvingly,  but  says:  "This  is  one  of  the  most 
important  truths  in  finance"  (Ibid,  232).  Here  we  have 
two  statements  which  are  as  opposed  to  each  other  as  are  the 
pages  on  which  they  are  printed.     "The  value  of  gold  would 

be  reduced  by  mutual  banking its  issue  (mutual 

money)  can  have  no  effect  whatever  to  cause  a  rise  or  fall  in 
the  price  of  the  precious  metals."  Of  course  Mr.  Tucker  is 
right  in  the  first  statement,  and  both  he  and  Col,  Greene  are 
therefore  necessarily  wrong  in  the  second  statement.  "Mut- 
ual money  is  measured  by  specie!"  If  this  is  true,  then 
mutual  money  must  follow  the  decline  in  the  value  of  gold 
which  will  follow  its  issue.  The  issue  of  mutual  money 
then,  W'ill  cause  a  rise  in  prices,  because  it  will  cause  a  depre- 
ciatior  of  the  value  of  gold.  Mutual  money  being  "meas- 
ured by  specie"  will  go  down  with  the  gold,  and  conse- 
quently will  also  be  reduced  in  exchangeable  value,  which  is 
the  same  thing  as  a  rise  in  other  values.  To  what  confusion 
of  thought  does  the  infatuation  over  an  idea  lead!  If  mutual 
money  is  to  be  measured  by  specie,  we  are  indeed  in  a  bad 
fix,  and  all  the  evils  predicted  by  our  opponents  will  surely 
come  to  pass  if  the  Mutual  Credit  System  is  established. 


Il6  THE    NEW    PHILOSOPHY    OF    MONEY 

243  But  there  is  no  danger  that  the  evils  will  occur. 
Mutual  money  will  not  be  "measured  by  specie,"  nor  will 
any  one  part  with  it  for  less  than  its  face  value.  There  will 
be  a  reason  for  depreciation  in  gold.  It  will  be  "deprived  of 
that  exclusive  monetary  utility  conferred  upon  it  by  the 
State" — the  making  it  legal  tender:  but  there  will  be  no  rea- 
son for  depreciation  in  mutual  money,  because  the  demand 
for  it  to  pay  notes  of  borrowers  which  have  become  due  at 
the  Mutual  Credit  Association  will  always  be  in  exact  ratio 
to  the  volume  in  circulation.  In  other  words,  the  demand 
for  the  certificates  of  credit,  in  order  to  retire  them  from  cir- 
culation by  payment  of  notes  to  the  Mutual  Credit  Associa- 
tion will  be  as  constant  as  their  issue;  hence,  this  money  will 
be  more  acceptable,  as  currency,  than  anything  that  can 
compete  with  it.  For  this  reason,  it  will  not  depreciate  or 
follow  the  downward  course  of  gold.  Gold  will  go  out  of 
use  as  money  and  mutual  money  will  take  its  place. 

244  Mr.  Tucker  fails  to  comprehend  the  true  nature  of 
exchange  or  of  value,  when  he  says:  "Mr.  Westrups  article 
sustains  in  the  clearest  manner  my  contention  that  money  is 
impossible  without  a  standard  of  value.  Startmg  out  to 
show  that  such  a  standard  is  a  delusion,  he  does  not  succeed 
in  writing  four  sentences  descriptive  of  his  proposed  bank, 
before  he  adopts  that  'delusion'."  I  did  not  start  out  to  show 
that  "such  a  standard"  is  a  delusion,  but  that  "standard  of 
value"  is  not  a  concept  but  a  delusion,  Mr.  Tucker's  con- 
tention is  "that  money  is  impossible  without  a  standard  of 
value."  I  claim,  and  have  never  given  cause  for  any  one  to 
think  I  meant  otherwise,  that  j^^ipei"  money  is  impossible  (so 
long  as  all  are  not  perfectly  honest)  unless  its  redemption  is 
satisfactorily  provided  for.  Mr.  Tucker  says  that  the  only 
satisfactory  provision  is  a  definite  quantity  of  some  special 
commodity  obtainable  on  demand  in  exchange  for  the  j^aper 
money,  and  that  this  quantity  is  the  "standard  of  value." 
This  is  the  position  of  the  professors  and  the  "great  finan- 
ciers," and  as  I  have  previously  stated,  there  is  no  escaping 


MEASURE    OK    VALUE  II7 

the  evils  rcsulling  from  cornering  the  "standarti"  and  then 
demanding  it  in  redemption  of  the  paper  money,  which  can 
be  done  by  a  chiss  interested  in  depreciating  tlie  paper 
money  purely  for  speculative  purposes,  no  matter  what  com- 
modity be  selected  as  the  "standard."  And  I  claim  that  a 
quantity  of  any  commodity  cannot  be  a.  standard  of  value, 
because  the  value  of  that  quantity  is  not  fixed  but  is  ever 
subject  to  change;  that  to  call  that  which  is  changeable,  a 
standard,  is  to  talk  nonsense;  that  the  redemption  provided 
by  the  Mutual  Credit  system,  which  is  to  the  effect  that  each 
certificate  shall  be  retired  from  circulation  by  rendering  to 
the  holder  its  face  value  in  commodities  at  their  market  value 
or  price,  is  an  absolute  guaranty  of  their  entire  acceptability 
in  exchange  for  commodities,  not  affecting  change  in  values 
as  "standard"  money  does,  but  their  abundance  and  low  rate 
of  interest  v/ill  promote  enterprise  and  facilitate  exchanges 
on  a  cash  basis.  While  Col.  Greene  refers  to  "standard  of 
value"  as  though  there  was  such  a  thing,  he  made  no  provis- 
ion for  it  in  his  plan  for  mutual  banks.*  I  appreciate  Col. 
Greene's  writings  and  acknowledge  my  indebtedness  to  him; 

*The  Mutual  Credit  System  (see  plan)  is  proposed  as  an  improve- 
ment on  Col.  Greene's  Mutual  13ank,  which  was  as  follows: 

1 .  The  inhabitants,  or  any  portion  of  the  inhabitants,  of  any  town 
or  city  in  the  Commonwealth,  may  organize  themselves  into  a 
Mutual  Banking  Company. 

2.  Any  person  may  become  a  member  of  the  Mutual  Banking 
Company  of  any  particular  town,  by  pledging  real  estate  situated 
in  that  town,  or  in  its  immediate  neighborhood,  to  the  Mutual  Bank 
of  that  town. 

3.  The  Mutual  Bank  of  any  town  ma>'  issue  paper  money  to  circu- 
late as  currency  among  persons  willing  to  employ  it  as  such. 

4.  Every  member  of  a  Mutual  Banking  Company  shall  bind  him- 
self, and  be  bound  in  due  legal  form,  on  admission,  to  receive  in  pay- 
ment of  debts,  at  par,  and  from  all  persons,  the  bills  issued,  and  to  be 
issued,  by  the  particular  Mutual  Bank  to  which  he  may  belong;  but 
no  member  shall  be  obliged  to  receive,  or  have  in  possession,  bills  of 
said  Mutual  Bank  to  an  amount  exceeding  the  whole  value  of  the 
property  pledged  by  him. 

5.  Any  member  may  borrow  the  paper  money  of  the  bank  to 
which  he  belongs,  on  his  own  note  running  to  maturity  (without 
indorsement),  to  an  amount  not  to  exceed  one-half  of  the  value  of 
the  property  pledged  by  him. 

6.  The  rate  of  interest  at  which  said  monev  shall  be  loaned  by  the 


Il8  THE    NEW    PHILOSOPHY    OF    MONEY 

but  to  call  his  pamphlet  the  "standard  work"  on  the  subject 
sounds  a  little  too  orthodox  to  come  from  an  Anarchist,  espe- 
cially when  it  contains  the  glaring  error  I  have  pointed  out 
(242),  and  which  Mr.  Tucker  reproduced  as  "one  of  the 
most  important  truths  in  finance." 

245  Another  error  of  Mr.  Tucker's  is  that  of  naming 
Spooner  (241)  as  an  advocate  of  free  and  mutual  banking. 
Mr.  Spooner  never  advocated  mutual  banking,  at  all.  His 
scheme  is  a  joint-stock  affair,  involving  interest  to  those  who 
do  not  "get  in  on  the  ground  floor,"  and,  of  course,  dividends 
to  those  who  do.  This  is  neither  free  nor  mutual  banking 
and  is  on  a  par  with  Mr.  Hugo  Bilgram's  proposition  in  his 
recent  book,  "A  Study  of  the  Money  Question,"  which  advo- 
cates free  banking,  but  nevertheless  presents  a  plan  for  a  sys- 
tem of  money  to  be  run  by  the  government  and  in  which 
poor  borrowers  who  cannot  muster  up  enough  security  to 
borrow  $1,000  are  to  be  ignored  and  left  to  the  mercy  of 
money  sharks.  When  I  invited  Mr.  Tucker  to  "show  the 
necessity  for  a  standard  of  value"  and  suggest  how  to  intro- 
duce one,  he  declined,  saying,  "I  have  no  occasion  to  show 
the  necessity  for  a  standard  of  value.  Such  necessity  is 
already  recognized  by  the  people  whom  w^e  are  trying  to 
convince  of  the  truth  of  mutual  banking."  This  would  seem 
to  imply  that  since  the  people   believe  in  it,  and  Col.  Greene 


bank  shall  be  determined  bj,  and    shall,  if  possible,   just  meet  and 
cover  the  bare  expenses  of  the  institution. 

7.  No  money  shall  be  loaned  by  the  bank  to  persons  who  do  not 
become  members  of  the  company  by  pledging  real  estate  to  the  bank. 

8.  Any  member,  by  paying  his  debts  to  the  Mutual  Bank  to 
■which  he  belongs,  may  have  his  property  released  from  pledge,  and 
be  hii  iself  released  from  all  obligations  to  said  Mutual  Bank,  and  to 
holders  of  the  Mutual  Bank  money,  as  such. 

9.  No  Mutual  Bank  shall  receive  other  than  Mutual  Bank  paper 
money  in  payment  of  debts  due  it,  except  at  a  discount  of  one-half  of 
one  per  cent. 

10.  The  Mutual  Banks  of  the  several  counties  in  the  Common- 
wealth shall  be  authorized  to  enter  into  such  arrangements  with  each 
other  as  shall  enable  them  to  receive  each  other's  bills  in  payments 
of  debts;  so  that,  for  example,  a  Fitchburg  man  may  pay  his  debts  to 
the  Barre  Bank  in  Oxford  money,  or  in  such  o^her  Worcester  county 
money  as  may  suit  his  convenience. 


MEASURE    OF    VALUE  II9 

believed  in  it,  it  is  not  necessar}'  to  detcnninc  wlietlicr  it  is  an 
error  or  not.  But  since  Col.  Greene  made  no  provision  for 
a  "standard,"  and  since  his  mutual  money  would  not  have 
been  "measured  by  specie,"  as  he  affirmed,  because  ''the  value 
of  gold  would  be  reduced  by  mutual  banking,"  etc.,  there 
would  have  been  no  "standard  of  value"  in  his  system  any 
more  than  there  is  in  the  one  I  propose,  which  differs  from 
his  only  in  some  features  I  have  added.  If  Mr.  Tucker  sees 
the  necessity  for  a  "standard  of  value"  in  connection  with 
mutual  banking,  he  can  make  fame  for  himself  if  he  will 
invent  a  method  of  applying  it  to  that  system.  I  challenge 
him  to  do  it;  and  I  further  predict  that  when  he  applies  his 
own  mind  to  the  consideration  of  the  question  instead  of 
depending  upon  Col.  Greene  or  "standard  works  on  the  sub- 
ject," he  will  admit  my  position  to  be  the  correct  one.  I  am 
sorry  for  his  unreasonable  opposition,  because  it  has  materi- 
ally retarded  the  movement.  As  an  illustration  of  this,  let 
the  reader  turn  to  Mr.  Tucker's  letter  to  the  Neivs  (225) 
and  the  7V<:tCJ-'  rejoinder  (326-227);  then  the  comments  of 
Mr.  Tucker  (22S,  233).  "A  standard  of  value  is  highly 
desirable,  but  perhaps  this  is  as  much  as  can  be  safely  asserted 
on  that  question."  Unlike  Mr.  Tucker,  the  Ne-jcs  is  receptive 
to  the  correct  view,  and  he  was  altogether  too  hasty  in 
assuming  that  the  Ne-Jcs  took  "common  ground  with  me 
(him)  against  the  position  of  comrade  Westrup."  It  says: 
"A  note  properly  based  on  gold,  silver,  wheat,  cotton,  or 
other  commodity,  has  a  tangible  security  behind  it."  The 
"standard  for  valuation"  which  it  says  is  indispensable  as 
soon  as  circulating  notes  are  issued"  does  not  necessarily 
mean  a  standard  of  value,  but  the  denominator  "dollar." 

246  Under  the  Mutual  Credit  System,  value  is  expressed 
and  secured  credit  is  divided  by  this  denominator,  facilitating 
the  exchange  of  equivalents  of  one  for  the  other.  This 
secured  credit  being  based  on  gold,  silver,  wheat,  cotton,  or 
other  commodities,  and  therefore  having  a  "tangible  security 
behind  it,"  cannot   depreciate,    and  it  is  for  this  reason  and 


I20  THE    NEW    PHILOSOPHY    OF    MONEY 

because  borrowei's  bind  themselves  to  take  the  certificates 
into  which  it  is  divided  and  issued,  at  their  face  vakie  in  pay- 
ment of  debt  and  in  exchange  for  commodities  and  services 
without  discriminating  in  prices,  as  long  as  they  are  members 
of  the  Mutual  Credit  Association.  I  have  felt  warranted  in 
extending  this  chapter  to  so  great  a  length  because  of  the 
importance  of  the  subject.  It  is  the  question  about  which  it 
is  j^robable  the  hardest  fighting  will  be  done  when  free 
money  becomes  a  national  issue.  It  is  a  theme  on  which 
financiers  and  politicians  can  talk  glibly,  and  about  which 
they  will  incur  the  least  danger  of  being  understood. 


CONTROVERSY    BETWEEN    ALFRED    15.    WES 
TRUP  AND  EDWARD  ATKINSON  IN  RE- 
GARD TO   THE    MUTUAL  CREDIT 
ASSOCIATION. 

The  following  correspondence  explains  itself. 

MixxEAPOLis,  Minx.,  JMarch  iS,  1S94. 
Edward  Atkixsox,  Esq., 

Boston,  Mass. 

Dear  Sir: 

As  I  desire  to  publish  in  permanent  form  my  criticism 
of  your  North  Avierican  Reviezv  article,  "How  Distrust 
Stops  Trade,"  your  reply  and  my  rejoinder,  I  wish  to  give 
you  an  opportunity  to  correct  or  add  thereto  whatever  you 
may  wish  to  supplement.  I  insist  on  fair  piny.  I  am 
ahvays  willing  to  grant  it. 

Very  respectfully, 

Alfred  B.  Westrup. 


Boston,  March  23,  1S94. 
Alfred  B.  Westrup,  Esq., 

Minneapolis,  IMinn. 
Dear  Sir: 

Your  letter  of  the  iSth  has  been  received  in  the  absence 
of  Mr.  Atkinson.  He  is  out  of  town  and  will  probably  be 
absent  about  ten  days. 

Yours  respectfully, 

G.  Hamiltox. 


Up  to  this  date  (December,  1894),  I  have  heard  noth- 
ing further  from  Mr.  Atkinson,  so  our  statements  reappear 
as  they  were  originally  published. 


122  THE    NEW    PHILOSOPHY    OF    MONEY 


THE    NEGLECTED    ELEMENTS    IN    THE    MONEY    QUESTION. 

A  faper  read  by  Alfred  B.  Westrup  at  a  meeting  of  Minneapolis 
business  men  and  published  in  the  Minneapolis  Times. 

247  The  Duke  of  Argyll,  in  his  recent  work,  "The 
Unseen  Foundations  of  Society,"  struck  the  key-note  in  the 
discordant  and  unreconcilable  "dismal  science"  called  political 
economy,  when  he  showed  that  there  are  elements  which  the 
professors  are  not  familiar  with  and  which,  therefore,  they 
have  neglected  to  consider.  But  the  Duke  of  Argyll  has 
allowed  some  elements  to  escape  his  notice,  also,  and  is,  there- 
fore, amenable  to  the  same  charge  he  makes  against  the 
political  economists.  He  is  an  advanced  thinker  in  some 
respects,  yet,  in  common  with  all  the  popular  writers,  his 
conservatism  has  defeated  his  reaching  bottom,  if  such  was 
his  purpose. 

248  The  preconceived  notion!  How  many  men  or 
women  can  rise  above  it  and  welcome  the  truth;  discriminate 
between  conflicting  theories,  much  less  penetrate  into  the 
unknown;  that  no  elements  may  be  neglected,  no  facts  over- 
looked? 

249  It  is  my  purpose  in  this  paper  to  call  the  attention  of 
Mr.  Edward  Atkinson  to  his  shortcomings  in  this  respect; 
and  if  I  can  score  a  point  against  him  it  will  be  equally 
effective  against  Argyll  and  the  other  writers.  In  his 
article,  "How  Distrust  Stops  Trade,"  in  the  July,  1S93, 
number  of  the  North  American  Jiczw'czc,  he  has  very  forci- 
bly shown  the  evil  effects  of  bad  money,  but  if  his  philosophy 
had  included  the  neglected  elements  I  shall  presently  bring 
to  his  notice,  he  would  have  written  a  very  different  article. 
Mr.  Atkinson's  argument  centers  upon  credit  and  good 
money.     He  says: 

250  a.  "The  credit  which  each  man  can  extend  to  his 
nei"-hbor  depends  not  only  upon  the  quality  of  the  man,  but 
also  upon  the  quality  of  the   money  which  is  to  be  paid  and 


WESTRUP- ATKINSON    CONTUO VEKSY  I  23 

whicli  is  to  lie  rcceiveil.  When  a  doubt  exists  about  the 
quahty  of  the  money,  trade  stops." 

251  b.  "Credit  cannot  be  given  even  to  those  Avho  are 
entitled  to  it  when  the  credit  of  the  money  itself  is  doubtful. 
That  is  what  affects  trade  now.  The  quality  of  the  money 
which  is  lawful  in  the  United  States  is  doubted.  Why? 
Money  that  is  doubted  is  bad  money.     It  is  not  fit  to  be  used." 

253  c.  "The  only  definition  of  good  money  is  that  it  con- 
sists of  coin  which  is  worth  as  much  after  it  is  melted  into 
bullion  as  it  purported  to  be  worth  in  the  coin." 

253  I  will  now  point  out  the  neglected  elements,  the  fail- 
ure to  recognize,  and  therefore  non-participation  of  which,  in 
the  effort  to  solve  the  money  question,  has  led  to  the  errors 
and  almost  inextricable  confusion  which  characterizes  ortho- 
dox political  economy. 

254  The  neglected  elements  are:  First,  the  necessity  for 
a  system  of  secured  credit;  second,  the  possibilities  of  paper 
money  in  the  extension  of  credit;  third,  the  right  of  the 
individual. 

255  !Mr.  Atkinson's  statements  in  a  and  b  are  lamenta- 
tions that  leave  an  aching  void.  "The  credit  which  each 
man  can  extend  to  his  neighbor  depends  not  only  upon  the 
quality  of  the  man."  Then  it  docs  depend  upon  the  quality 
of  the  man  (this  is  personal  credit);  and  it  is  stated  as  one  of 
the  difficulties  we  have  to  contend  with.  Now,  what  are  we 
to  think  of  the  pilots  who,  when  they  run  up  against  a  snag, 
climb  over  it  instead  of  clearing  the  channel  that  navigation 
may  be  free  from  all  obstructions?  "Credit  cannot  be  given 
to  those  who  are  entitled  to  it."  To  deny  a  man  that  which 
he  is  entitled  to  is  an  injustice — an  outrage!  (23,  30)  Yet 
here  are  these  pilots,  leaders,  teachers,  whom  the  people  rely 
on  as  guides,  acknowledging  a  glaring  wrong  of  stupendous 
magnitude,  for  which  they  offer  no  remedy,  for  if  his  "only 
definition  of  good  money"  were  admitted  as  correct  and  car- 
ried into  effect,  it  could  not  afford  relief  from  that  wliich,  in 
the  absence  of  secured  credit  is  unavoidable — a  resort  to  imse- 


124  ^^^    NEW    PHILOSOPHY    OF    MONEY 

cured  credit  (93).  It  is  the  inadequacy  of  our  money  sys- 
tems that  prevent  us  from  transacting  all  business  on  a  cash 
basis  (58),  It  is  imjoerative  to  adopt  a  system  that  will 
admit  of  such  a  possibility — a  sj'stem  of  secured  credit  that 
Mr.  Atkinson  fails  to  see  the  necessity  for  (48,  95). 

256  Credit  is  divided  into  two  kinds — personal  or  unse- 
cured, and  real  or  secured.  To  illustrate:  When  goods  are 
sold  the  payment  of  which  is  deferred  until  some  future  time, 
and  no  security  is  pledged  to  make  good  the  payment  in  case 
of  default,  it  is  unsecured  credit. 

257  When  goods  are  sold  for  cash,  or  the  payment  of 
which  is  immediate  and  in  paper  money  (when  payment  is 
made  in  coin  it  is  barter)(8i-88),  or  when  the  payment  is 
guaranteed  by  a  pledge  of  security,  it  is  secured  credit  (79- 
91).  The  former  (personal  or  unsecured  credit)  has  no  place 
in  a  treatise  on  economics  (95(3:).  It  is  a  personal  matter  with 
which  the  economist  has  nothing  to  do.  The  business  of  the 
economist  is  to  devise  a  system  of  secured  credit  that  would 
be  satisfactory,  in  order  that  we  may  not  be  compelled  to 
resort  to  unsecured  credit  in  the  exchange  of  commodities  or 
service  as  is  unavoidable  under  the  present  money  system. 
It  will  be  conceded  on  all  sides  that  cash  or  secured  credit  is 
preferable  to  unsecured  credit,  and  it  will  not  be  disputed  that 
under  the  present  money  system  it  would  be  impossible  to  do 
all  business  on  a  cash  basis,  time  being  given  to  receive  and 
examine  goods  only.  For  any  one  or  many  to  voluntarily 
give  personal  credit  to  some  is  quite  natural,  but  that  no  sys- 
tem of  secured  credit  has  been  put  into  practical  operation,  or 
has  ever  been  suggested  by  the  professors,  is  the  worst 
blunder  that  has  ever  been  committed;  and,  as  I  have  said, 
sliows  plainly  that  Mr.  Atkinson  fails  to  perceive  the  neces- 
sity for  a  system  of  secured  credit. 

258  Second:  Up  to  the  present  time,  the  moneyed  inter- 
ests have  been  so  managed  that  the  enormous  advantage  of 
p:ipcr  money,  instead  of  having  been  utilized  in  extending 
credit  in  the  interest  of  the  borrower,    has    been  used  as  a 


^VES^R  UP- ATKINSON    (.OX  TROVE  RSY 


125 


means  of  speculation  in  the  hands  of  the  lender.  If  Mr. 
Atkinson  had  not  overlooked  the  fact  that  the  use  of  paper 
money  admits  of  a  system  whereby  credit  can  be  issued  in 
that  form  on  any  commodity  that  can  be  safely  warehoused, 
as  well  as  on  immovable  property,  he  would  not  have  dragged 
the  character  of  the  individual  into  the  discussion.  Given 
adequate  security,  the  quality  of  the  applicant  for  credit 
should  have  no  more  to  do  with  his  obtaining  it,  than  his 
religious  belief  or  his  jDolitical  creed. 

259  Mr.  Atkinson's  "only  definition  of  good  money"  is 
the  stock  argument  in  favor  of  coin  money — the  dogmatic 
assertion  that  only  coin  it  money.  But  this  position  was  sur- 
rendered the  moment  tliey  issued  paper  in  excess  of  coin  on 
deposit.  It  was  repudiated  when  issued  on  United  States 
bonds,  and  again  in  the  issue  of  clearing-house  certificates. 

260  Whejt  a  specie  fayijig  bank  issues  an  excess  of 
paper  over  coin^  the  excess  is  the  unsecured  credit  of  the 
banker.  Now,  I  want  to  know  if  the  borrower  who  bor- 
rows this  unsecured  credit  of  the  banker,  and  puts  up  good 
security,  why  those  who  take  the  paper  money  he  has  bor- 
rowed of  the  banker  would  not  be  better  j^i'otected  against 
loss  if  the  security  was  pledged  to  secure  them,  instead  of 
being  turned  over  to  the  banker  to  secure  him?  Again:  If 
clearing-houses,  which  are  associations  of  bankers,  can  issue 
money  called  "clearing-house  certificates,"  thus  inflating  the 
currency  and  enabling  them  to  loan  more  money  at  a  rate  of 
interest  that  leaves  them  a  profit,  why  cannot  the  borrowers 
who  put  up  good  security  organize  an  association  and  issue 
paper  money  also?  The  paper  money  would  be  utilized  in 
the  interest  of  the  borrower,  and  as  already  stated,  a  system 
of  secured  credit  would  be  established.* 

261  Third:  It  is  a  universal  practice  with  political  econ- 
omists, and  Mr.  Atkinson  is  no  exception,  to  ignore  the  right 
of  the  individual.      They  aflirm   a  method   to  be  correct  and 


*  See  Prospectus. 


126  THE    NEW    PHILOSOPHY    OF    MONEY 

call  upon  the  individual  to  submit  to  the  inconveniences  or 
burdens  it  imposes,  attributing  them  to  the  perversity  of 
human  nature,  instead  of  pursuing  investigation  to  discover 
the  real  cause.  Thus,  when  Mr,  Atkinson  says,  "credit  can- 
not be  given  even  to  those  w^ho  are  entitled  to  it,"  he  con- 
cedes that  they  are  subject  to  conditions  which  others  control, 
the  remedy  for  which  is  that  such  control  shall  cease,  or  in 
other  words,  the  institution  of  a  system  that  others  cannot 
control;  that  under  any  and  all  circumstances,  those  who  are 
entitled  to  credit  will  be  able  to  get  it  without  let  or  hin- 
drance. This  reasoning  recognizes  the  right  of  the  individ- 
ual and  affords  him  the  opportunity  to  help  himself. 

262  But  Mr.  Atkinson  contemplates  nothing  of  the  kind. 
I  will  grant,  for  the  sake  of  argument,  that  the  bullion  value 
of  everv  coin  in  the  United  States  is  equal  to  its  face  value. 
How  is  the  individual  who  wants  credit  and  has  ample  secur- 
ity, to  obtain  it?  This  seems  too  deep  for  Mr.  Atkinson.  He 
has  nothing  to  offer.  Such  individuals  are  turned  over  to  the 
tender  mercies  of  the  money-lenders,  or  to  those  who  have 
the  goods  he  needs.  "The  money  which  is  lawful  being  no 
longer  doubted,  he  will  be  able  to  get  all  the  credit  which  he 
is  entitled  to."     Let  us  see  if  this  is  true. 

263  Paper  money  is  a  form  of  credit.  It  is  the  most 
desirable  form  of  credit  when  it  is  secured  credit.  The 
source  of  paper  money  in  this  country  is  the  United  States 
government.  It  is  issued  to  those  only  who  have  gold,  silver 
and  United  States  bonds  (17-21).  The  individual  who  has 
security  other  than  gold,  silver  or  United  States  bonds,  is 
denied  the  right  to  this  form  of  credit,  because  paper  money 
is  not  issued  to  him  on  his  security,  and  he  is  therefore 
dependent  upon  those  to  whom  it  has  been  issued. 

264  Credit,  then,  in  this  form,  is  not  only  limited  by  a 
political  institution,  but  it  is  furnished  without  interest  to 
exceedingly  few  individuals,  and  they  loan  it  out  to  all  the 
rest  of  the  inhabitants  who  must  borrow,  at  such  high  rates  as 
this  monopoly  can  enforce.      This  constitutes  a  denial  of  the 


WESTRUP- ATKINSON    CONTROVERSY 


127 


right  of  private  property  (30).  If  one  cannot  use  Iiis  prop- 
erly for  purposes  of  credit  without  he  obtains  the  consent  of 
another,  to  that  extent  that  other  controls  his  property.  He 
cannot  get  credit  except  as  he  obtains  the  consent  of  another 
and  pays  a  bonus— -interest  in  excess  of  cost  (95). 

265  This  latter  represents  nothing  but  the  monopoly  price 
of  credit  (^^^d).  This  statement  constitutes  a  refutation  of 
]Mr.  Atkinson's  position.  It  is  not  true  that  under  the  pre- 
vailing systems  of  money  the  Mic'ividual  can  obtain  the  credit 
he  is  entitled  to  (105).  Nor  can  he  under  any  system  save 
the  one  I  propose — the  establishment  of  Mutual  Credit  Asso- 
ciations to  print  and  furnish  certificates  of  credit  of  all  denom- 
inations to  such  individuals  as  can  put  up  good  security,  such 
borrow^ers  to  bind  themselves  in  legal  form  to  accept  the  said 
certificates  in  payment  of  debt  at  their  face  value,  and  also  in 
exchange  for  commodities  or  services  without  discriminating 
in  prices. 

266  Life  insurance,  and  Mr.  Atkinson  knows  that  fire 
insurance,  also,  has  been  successful  on  the  mutual  plan;  why 
not  banking.'' 

267  The  cost  of  issuing  this  money  and  taking  care  of 
the  security  would  not  exceed  one  joer  cent  per  annum  (316). 
It  would  necessarily  result  in  all  credit  taking  that  form  as 
rapidly  as  possible,  as  any  business  man  can  see  that  it  will  be 
a  great  saving  to  borrow  money  at  that  rate  and  pav  cash 
rather  than  buy  on  time  credit. 

26S  AVhat  I  propose  is  the  establishment  of  a  commercial 
system  of  money  instead  of  the  existing  political  system. 
AVe  have  outgrown  the  old  system  and  we  must  prepare  for 
the  new.  Evolution  is  as  Imj^erative  in  monetary  affairs  as  it 
is  in  all  others. 


269  September  4th,  the  dav  my  criticism  of  Mr.  Atkin- 
son's article  appeared  in  the  T'l'mcs,  I  called  on  Mr.  John 
Blanchard,  the  editor,  and   had  quite  a  long    talk  with  him. 


128  THE    NEW    PHILOSOPHY    OF    MONEY 

He  told  me  he  would  write  to  Mr.  Atkinson  asking  him  to 
reply  to  my  criticism  and  would  enclose  a  copy  of  the  same. 
The  following  communication  shows  that  he  did  so. 


THE    MUTUAL    CREDIT    SCHEME, 
\liIinneafolix  Times,  Sept.  12,  iSgj.'\ 
To  tlic  Editor  of  the  Times  : 

270  I  have  your  letter  of  the  4th,  and  in  response  to  your 
request  that  will  write  a  rejoinder  to  A.  B.  Westrup's 
review  of  a  certain  article  of  my  own,  I  beg  to  say  that  Mr. 
Westrup's  statement  of  his  scheme  for  paper  money  is  so 
incomplete  as  to  make  it  impossible  to  subject  it  to  scientific 
criticism.  Before  any  discussion  can  be  had  upon  this  old  and 
familiar  conception  of  a  Mutual  Credit  Association  furnishing 
certificates  of  credit,  it  is  necessary  for  Mr.  Westrup  to  define 
the  standard  of  redemption  by  which  the  valuation  or  mental 
estimate  of  the  worth  of  these  certificates  is  to  be  established. 

271  Again,  if  I  comprehend  Mr.  Westrup,  he  would 
give  credit  money  an  absolute  quality,  to  the  end  that  its 
acceptance  by  a  vendor  would  require  no  consent  on  his  part. 
His  argument  implies  that  a  man  who  desires  to  buy  com- 
modities or  services  is  entitled  to  something  that  he  can  use 
as  a  medium  of  exchange,  which  he  may  use  without  the  con- 
sent of  the  other  party  in  each  transaction  and  without  regard 
to  his  own  personal  character,  standing  or  property.  What 
is  the  standard  of  redemption  of  that  type  of  credit? 

272  Mr.  Westrup  proposes  to  establish  a  Mutual  Credit 
Association  "to  print  and  furnish  certificates  of  credit  of  all 
denominations  to  such  individuals  as  can  put  up  good  secur- 
ity, such  borrowers  to  bind  themselves  in  legal  form  to 
accept  such  certificates  in  payment  of  debts  at  their  face  value 
and  also  in  exchange  of  commodities  and  services,  without 
discriminating  in  prices."  If  Mr.  Westrup  proposes  to  make 
such  an  organization,  why  does  he  not  proceed  to  do  so?  He 
is  as  free  to  move  in  the  matter  as  others  are  free  to  refuse. 
It  is  a  very  old  and  familiar  conception.  There  is  no  objec- 
tion to  it  ^Drovided  any  number  of  people  can  be  persuaded  to 
go  into  it.  Why  do  not  ]SIr.  Westrup  and  his  coadjutors,  if 
any,  undertake  this  method  of  making  exchanges?  There  is 
nothing  to  hinder. 


WESTRUP-ATKINSON    CONTROVERSY  1 29 

273  Now,  unless  Mr.  Westrup  can  state  what  the  stand- 
ard of  redemption  in  his  proposed  system  is  to  be,  then  I 
think  he  must  either  be  held  to  be  incapable  of  dealing  with 
the  subject,  or  else  business  men  of  long  experience,  econo- 
mists and  others  who  have  studied  the  monetary  question  are 
incapable  of  comprehending  what  Mr.  Westrup  means.  In 
either  event,  it  would  be  a  waste  of  time  for  men  of  experi- 
ence in  business,  or  men  who  have  made  a  long  study  of 
monetary  science  to  enter  into  any  discussion  of  this  old  and 
familiar  fallacy.  The  fault  with  it  is,  that  without  an  act  of 
legal  tendei  behind  them  such  certificates  will  not  pass;  with 
an  act  of  legal  tender  forcing  them  into  use,  they  would  be  a 
fraud. 

Yours  very  truly, 

Edward  Atkinson. 


The  following  is  my  rejDly  to  Mr.  Atkinson's  rejoinder. 

THE    MUTUAL    CREDIT    SCHEME. 
[^Minneapolis  Times,  Sept.  ij,  ^Sgj^ 
To  the  Editor  oj  the  Times : 

274  In  your  issue  of  today  you  print  a  communication 
from  Edward  Atkinson,  purporting  to  be  a  rejoinder  to  my 
criticism  of  his  North  Avicrican  Review  article.  Reading 
carefully  the  communication,  I  find  no  reference  whatever  to 
my  criticisms.  His  "rejoinder"  is  devoted  entirely  to  the 
IMutual  Credit  Association  scheme,  of  which  he  says  liis 
knowledge  is  "so  incomplete  as  to  make  it  impossible  to  sub- 
ject it  to  scientific  criticism." 

275  I  criticise  him  for  neglecting  certain  elements  relating 
to  the  subject  he  is  constantly  writing  about,  and,  instead  of 
answering  my  criticisms,  he  evades  the  issue  by  writing  a 
third  of  a  column  in  opposition  to  a  scheme  he  admits  he  does 
not  understand. 

276  Omitting  my  arguments  to  sustain  my  position,  be- 
cause they  would  take  up  too  much  space,  I  will  merely 
quote  the  charge  I  brought  against  Mr.  Atkinson  in  the 
review  alluded  to. 

277  "It  is  my  purpose  in  this  paper  to  call  the  attention 
of  Edward  Atkinson  to  his  shortcomings  in  this  respect;  and 

9 


130  THE    NEW    PHILOSOPHY    OF    MONEY 

if  T  can  score  a  point  against  him,  it  will  be  equally  effective 
against  Argyll  and  the  other  writers.  In  his  article,  "Plow 
Distrust  Stops  Trade,"  in  the  July,  1S93,  number  of  the 
North  American  Review^  he  has  very  forcibly  shown  the 
evil  effects  of  bad  money,  but  if  his  philosophy  had  included 
the  neglected  elements  I  shall  presently  bring  to  his  notice, 
he  would  have  written  a  very  different  article 

278  "I  will  now  point  out  the  neglected  elements,  the 
failure  to  recognize,  and  therefore  non-participation  of  which, 
in  the  effort  to  solve  the  money  question,  has  led  to  the  errors 
and  almost  inextricable  confusion  which  characterizes  ortho- 
dox political  economy. 

279  "The  neglected  elements  are:  First,  the  necessity 
for  a  system  of  secured  credit;  second,  the  possibilities  of 
paper  money  in  the  extension  of  credit;  third,  the  right  of 
the  individual." 

280  In  answer  to  a  letter  from  the  editor  of  the  Times 
enclosing  my  entire  article  asking  him  to  respond  to  it,  Mr. 
Atkinson  writes:  *'I  have  your  letter  of  the  4th,  and  in 
response  to  your  request  that  I  will  write  a  rejoinder  to  A. 
B.  Westrup's  review  of  a  certain  article  of  my  own,  I  beg  to 
say  that  Mr.  Westrup's  statement  of  his  scheme  for  paper 
money  is  so  incomplete  as  to  make  it  impossible  to  subject  it 
to  scientific  criticism." 

281  There  is  not  a  word  in  all  the  rest  of  his  communi- 
cation about  my  accusation  that  he  has  overlooked  elements 
relating  to  the  money  question,  and  anyone  familiar  with 
correct  methods  of  conducting  a  discussion  will  readily  see 
that  he  has  evaded  the  point  at  issue. 

282  I  affirm  that  Mr.  Atkinson's  philosophy  ignores  the 
rights  of  the  individual  who  has  security,  to  credit,  and  there- 
fore he  is  ignorant  of  the  necessity  for  a  secured  credit  sys- 
tem, which  the  extension  of  credit  by  means  of  the  invention 
of  paper  money,  makes  possible.  Does  Air.  Atkinson  prove 
that  this  statement  is  not  true  by  trying  to  show  that  the 
Mutual  Credit  Association  plan  is  impracticable?  It  is  beg- 
ging the  cpiestion;  and  I  insist  that  he  meet  the  issue  fairly 
and  apply  his  "scientific  criticism"  to  aid  the  establishment  of 
a  system  that  recognizes  and  embodies  these  neglected  ele- 
ments. 

283  Now,  a  few  words  about  Mr.  Atkinson's  attempt  to 
criticise  the  Mutual  Credit  Association  plan.  He  says: 
"Mr.  Westrup's  statement  of  his  scheme  for  paper  money  is 


WESTRUP-ATKIXSONT    CONTROVERSY  I31 

SO  incomplete  as  to  make  it  impossible  to  subject  it  to  scien- 
tific criticism";  and  yet  in  his  very  next  statement  he  says: 
*'Before  any  discussion  can  be  had  on  this  old  and  familiar 
conception  of  a  Mutual  Credit  Association  furnishing  certifi- 
cates of  credit,  it  is  necessary  for  Mr.  Westrup  to  define  the 
standard  of  redemption  by  which  the  valuation  or  mental 
estimate  of  the  worth  of  these  certificates  is  to  be  established." 

2S4  The  public  should  know  that  Mr.  Atkinson's  famili- 
arity with  the  mutual  credit  idea  was  derived  from  the  author 
of  "Mutual  Banking,"  Col.  Wm.  B.  Greene,  with  whom  he 
debated  on  the  subject  on  a  public  platform  many  years  ago, 
and  that  if  his  knowledge  of  my  "scheme"  is  incomplete,  it 
is  his  fault,  as  in  1S91  I  mailed  him  copies  of  my  two  pamph- 
lets and  a  cojDy  of  each  number  of  my  paper,  the  Auditor^  as 
long  as  I  published  it.  I  also  sent  him  duplicate  copies  of  a 
series  of  questions  with  a  request  that  he  answer  them,  but 
which  answers  I  never  received. 

285  It  would  seem  as  though  the  following  quotation 
which  he  makes  from  my  review  of  his  article  is  a  satisfac- 
tory answer  to  his  query  about  a  "standard  of  redemption." 

256  "Mr.  Westrup  proposes  to  establish  a  Mutual  Credit 
Association  'to  print  and  furnish  certificates  of  credit  of  all 
denominations  to  such  individuals  as  can  put  up  good  security, 
such  borrowers  to  bind  themselves  in  legal  form  to  accept 
such  certificates  in  payment  of  debts  at  their  face  value  and 
also  in  exchange  for  commodities  and  services  without  dis- 
criminating in  prices'." 

257  It  is  very  hard  for  these  political  economists  to  realize 
that  there  is  no  standard  in  value,  that  the  monetary  unit, 
*'dollar,"  being  conventionally  agreed  upon,  is  all  that  is  pos- 
sible to  form  a  "mental  estimate,"  not  of  their  worth,  but  by 
which  we  can  convey  from  one  mind  to  another  the  market 
value  of  commodities. 

258  It  is  clear  that  Mr.  Atkinson  has  not  yet  grasped  the 
idea  of  the  Mutual  Credit  Association  plan  for  paper  money. 
The  certificates  are  redeemed  every  time  a  member  of  the 
association  accepts  them  in  payment  of  debt  or  in  exchange 
for  commodities,  and  they  are  issued  whenever  a  member 
pays  debts  or  buys  commodities  with  them.  If  a  member 
pays  out  some  of  this  money  and  fails  to  take  it  back 
exchange  or  in  payment,  the  association  places  his  security — 
which  he  had  to  pledge  to  get  the  money — on  the  market, 
and  redeems  the  money  itself  by  accepting  it  in  payment. 
It  is  tben  destroyed.  Alfred  B.  Westrup. 


132  THE    NEW    PHILOSOPHY    OF    MONEY 

2S9  It  was  not  possible  within  the  limits  of  a  newspaper 
article  to  point  out  all  the  imreasonableness  contained  in  Mr. 
Atkinson's  rejoinder,  and  it  is  necessary  to  review  it  a  little 
more  at  length.  In  the  second  paragraph  Mr.  Atkinson 
says:  "If  I  comprehend  Mr.  Westrup  he  would  give  credit 
money  an  absolute  quality,  to  the  end  that  its  acceptance  by 
a  vendor  would  requu"e  no  consent  on  his  part.  His  argu- 
ment implies  that  a  man  who  desires  to  buy  commodities  or 
services  is  entitled  to  something  that  he  can  use  as  a  medium 
of  exchange,  which  he  may  use  without  the  consent  of  the 
other  party  in  each  transaction,  and  without  regard  to  his 
own  personal  character,  standing,  or  property."  In  the  very 
next  paragraph  'he  quotes  from  the  proposed  plan  of  the 
Mutual  Credit  Association  what  proves  that  the  foregoing  is. 
not  true.  He  says:  "Mr.  Westrup  proposes  to  establish  a 
Mutual  Credit  Association  'to  print  and  furnish  certificates  of 
credit  of  all  denominations  to  such  individuals  as  can  put  up 
good  security,  such  borrowers  to  bind  themselves  in  legal 
form  to  accept  such  certificates  in  payment  of  debt,  at  their 
face  value,  and  also  in  exchange  of  commodities  and  services 
without  discriminating  in  prices."  Any  one  who  thinks  must 
know  that  the  paper  money  of  an  association  cannot  be  made 
legal  tender.  Indeed,  The  New  Philosophy  of  Money  is 
utterly  opposed  to  legal  tender  money.  How,  then,  can  the 
certificates  of  credit  of  the  IMutual  Credit  Association  be  used 
to  buy  or  pay  debt  "without  the  consent  of  the  other  party  in 
each  transaction.?"  And  if  it  is  to  be  furnished  only  to  "such 
individuals  as  can  put  up  good  security,"  why  does  he  say, 
"and  without  regard  to  his  own  personal  character,  standing, 
or  property?"  The  latter  part  of  this  statement  is  not  true. 
The  borrower  mtist  put  up  property  that  is  good  security 
before  he  can  get  the  certificates.  What,  then,  has  his  per- 
sonal character  or  standing  to  do  with  it.''  Continuing, 
within  three  lines  of  what  has  just  been  quoted,  he  says: 
"There  is  no  objection  to  it  provided  any  number  of  people 
can  be  persuaded  to  go  into  it."     He  first  concludes  that  the 


WESTRUP- ATKINSON    CONTROVERSY  I  33 

Mutual  Credit  Association  is  a  scheme  to  furnish  "money" 
to  anyone  who  needs  it  rci^ardless  of  his  "personal  character, 
standing,  or  property,"  and  which  he  may  use  "without  the 
consent  of  the  other  party  in  each  transaction,"  and  yet  he 
says,  "there  is  no  ohjection  to  it  j^rovided  any  number  of 
people  can  be  persuaded  to  go  into  it,"  "What  a  travesty 
on  common  sense  is  this!  But  then,  tliis  is  not  "scientific 
criticism,"  the  reader  must  remember:  Mr.  Atkinson  can 
perhaps  label  it  for  him. 

290  The  "standard  of  redemption,"  which  Mr.  Atkinson 
lavs  so  much  stress  upon,  as  the  reader  will  readily  under- 
stand, has  reference  to  the  definite  quantity  of  some  special 
commodity  redemption  fake,  of  which  so  much  has  already 
been  said;  so  I  will  pass  that  by.  I  must,  however,  once 
more  call  attention  to  Mr.  Atkinson's  evasion  of  my  criti- 
cism. I  charge  him  with  neglecting  certain  essential  ele- 
ments relating  to  this  subject,  and  the  charge  is  equally 
applicable  to  all  the  political  economists.  These  elements 
are:  the  imperative  necessity  for  a  system  of  secured  credit 
to  take  the  place  of  the  present  unsecured  credit  system; 
the  possibilities  of  paper  money  in  the  extension  of  credit; 
or,  in  other  words,  the  application  of  the  invention  of  paper 
money  to  the  needs,  and  in  the  interest  of  borrowers  instead 
of  in  the  interest  of  money-lenders;  and  lastly  the  recog- 
nition of  the  right  of  the  individual  to  use  his  property  for 
purposes  of  credit.  The  present  system  of  money  is  the 
result  of  efforts  on  the  part  of  money-lenders  and  politicians 
to  have  what  suited  their  purpose.  It  is  the  mother  of  inters 
est.  It  enables  greed  to  accumulate  wealth  it  did  not  earn; 
and  it  perpetuates  poverty  and  ignorance,  which  enables  the 
politicians  the  more  effectually  to  gratify  their  ambition  to 
rule.  The  political  economist,  instead  of  calling  attention  to 
the  neglected  elements,  and  insisting  on  their  recognition  as 
principles  which  must  not  be  ignored  in  providing  a  medium 
of  exchange,  have  ever  been  lavish  in  apoligies,  and  energetic 
in  defense  of  the  existing  system;  Mr.  Atkinson  being  one  of 


134  ^^^    NEW    PHILOSOPHY    OF    MONEY 

the  most  persistent.  But  while  lack  of  familiarity  with  the 
money  question  admits  of  many  ambiguous  statements  passing 
for  profound  wisdom,  it  surely  is  not  beyond  the  power  of 
any  one  who  can  read  ordinary  English  intelligently  to  per- 
ceive the  glaring  absurdity  in  the  following,  which  is  the  way 
Mr.  Atkinson  commences  his  letter:  "I  have  your  letter  of 
the  4th,  and  in  response  to  your  request  that  I  will  write  a 
rejoinder  to  A.  B,  Westrup's  review  of  a  certain  article  of  my 
own,  I  beg  to  say  that  Mr.  "Westrup's  statement  of  his  scheme 
for  paper  money  is  so  incomplete  as  to  make  it  impossible  to 
subject  it  to  scientific  criticism."  The  eternal  fitness  of  things, 
which  is  here  so  utterly  disregarded,  can  be  more  readily 
understood  by  the  following  illustration:  A  certain  individ- 
ual of  great  fame  as  an  astronomer  writes  an  essay  on  the 
philosophy  of  the  spectral  ray.  Another  individual  who  is 
only  an  inventor  of  a  spectroscope  criticizes  the  eminent 
astronomer,  affirming  that  he  has  neglected  to  consider  cer- 
tain elementary  facts;  whereupon  the  eminent  astronomer 
vv^rites  a  "rejoinder"  stating  that  while  he  has  never  seen  the 
inventor's  spectroscope,  and  only  had  a  vague  idea  of  what  it 
consisted,  he  nevertheless  affirmed  that  it  was  only  a  delusion 
and  would  not  do  the  work  it  was  claimed  it  would.  The 
eminent  astronomer,  not  being  able  to  meet  the  arguments  of 
his  critic,  contented  himself  by  calling  in  question  the  practi- 
cabihty  of  his  critic's  invention;  as  though  (admitting  its 
defects)  it  could  possibly  have  any  bearing  on  the  correctness 
of  h:s  own  position.  So  Mr.  Atkinson,  failing  in  ability  to 
defend  himself  against  the  charges  I  make,  comes  back  at  me 
with,  neither  ivill your  schetfte  work.  If  it  were  admitted, 
for  the  sake  of  argument,  that  the  mutual  credit  idea  is  only 
a  "familiar  fallacy,"  would  it  prove  that  in  his  philosophy  of 
money,  he  has  not  failed  to  take  into  consideration  certain 
factors  which  I  call  neglected  elements?  In  his  answer  to 
the  editor  of  the  Times^  he  says:  "I  have  your  letter  of  the 
4th,  and  in  response  to  your  request  that  I  will  write  a 
rejoinder  to  A,  B.  Westrup's  review  of  a  certain  article  of  my 


WESTRUP-ATKIXSON    CONTROVERSY  I35 

own,  .  .  ."  He  is  requested  to  answer  my  criticisms  of 
a  certain  article  of  his.  Does  he  do  it?  No;  he  never  refers 
to  them  at  all,  but  goes  off  on  another  subject  which  was  not 
mentioned  in  the  article  criticized.  It  is  just  such  loose  rea- 
soning as  this  that  characterizes  most  of  the  writings  of  these 
famous  political  economists. 

291      The  following  article  will  no  doubt  prove  an  inter- 
esting' contribution  to  this  controversy. 


EDWARD    ATKINSON  S    EVOLUTION. 

292  The  great  central  principle  of  Anarchistic  economics 
— namely,  the  dethronement  of  gold  and  silver  from  their 
position  of  command  over  all  other  wealth  by  the  destruction 
of  their  monopoly  currency  privilege — is  rapidly  forging  to 
the  front.  The  Farmers'  Alliance  subtreasury  scheme,  un- 
scientific and  clumsy  as  it  is,  is  a  glance  in  this  direction. 
The  importance  of  Senator  Stanford's  land  bill,  more  scien- 
tific and  workable,  but  incomplete,  and  vicious  because  gov- 
ernmental, has  already  been  emphasized  in  these  columns. 
But  most  notable  of  all  is  the  recent  evolution  in  the  finan- 
cial attitude  of  Edward  Atkinson,  the  most  orthodox  and 
cock-sure  of  American  economists,  who  now  swells  with  his 
voice  the  growing  demand  for  a  direct  representation  of  all 
wealth  in  the  currency. 

293  In  a  series  of  articles  in  Bradstreet''s  and  in  an  ad- 
dress before  the  Boston  Boot  and  Shoe  Club,  this  old-time 
foe  of  all  paper  money  not  based  on  specie;  this  man  who, 
fifteen  or  twenty  years  ago,  stood  up  in  the  town  hall  of 
Brookline  in  a  set  debate  with  Col.  Wm.  B.  Greene  to  com- 
bat the  central  principle  of   mutual  banking;  this ,  who 

has  never  lost  an  opportunity  of  insulting  Anarchism  and 
Anarchists, — now  comes  forward  to  save  the  country  with  an 
elaborate  financial  scheme  which  he  offers  as  original  with 
himself,  but  which  has  really  been  Anarchistic  thunder  these 
many  years,  was  first  put  forward  in  essence  by  Proudhon, 
the  father  of  Anarchism,  and  was  championed  by  Atkinson's 
old  antagonist.  Col,  Wm.  V>.  Greene,  to  the  end  of  his  life. 
Of  course,  all  the  papers  are  talking    about  it,  and,  on  the 


136  TJIE    XEAV    PHILOSOPHV    OF    MOXEV 

principle  that  "everything  goes"  that  comes  from  the  great 
Atkinson,  most  of  them  give  it  a  warm  welcome,  though 
precious  few  of  them  understand  what  it  means.  Those 
which  probably  do  understand,  like  the  New  York  Evening 
Post,  content  themselves  for  the  present  with  a  mild  protest, 
reserving  their  heavier  fire  to  be  used  in  case  the  plan  should 
seem  likely  to  gain  acceptance. 

294  The  proposal  is  briefly  this:  that  the  national  banks 
of  the  country  shall  be  divided  into  several  districts,  each  dis- 
trict having  a  certain  city  as  a  banking  center;  that  any  bank 
may  deposit  with  the  clearing-house  securities  satisfactory  to 
the  clearing-house  committe,  and  receive  from  the  clearing- 
house certificates  in  the  form  of  bank-notes  of  small  denomi- 
nations, to  the  extent  of  seventy-five  per  cent  of  the  value  of 
the  securities;  that  these  notes  shall  bear  the  bank's  promise 
to  pay  on  the  back,  and  shall  be  redeemable  on  demand  at 
the  bank  in  legal  tender  money,  and,  in  case  of  failure  on  the 
bank's  part  to  so  redeem  them,  they  shall  be  redeemable  at 
the  clearing-house;  and  that  this  new  circulating  medium 
shall  be  exempt  from  the  ten  per  cent  tax  imposed  upon 
State  bank  circulation. 

295  Of  course  a  scheme  like  this  would  not  work  the  eco- 
nomic revolution  which  Anarchism  expects  from  free  bank- 
ing. It  does  not  destroy  the  monopoly  of  the  right  to  bank; 
it  retains  the  control  of  the  currency  in  the  hands  of  a  cabal; 
it  undertakes  the  redemption  of  the  currency  in  legal  tender 
money,  regardless  of  the  fact  that,  if  any  large  proportion  of 
the  country's  wealth  should  become  directly  represented  in 
the  currency,  there  would  not  be  sufficient  legal  tender  money 
to  redeem  it.  It  is  dangerous  in  its  feature  of  centralizing 
responsibility  instead  of  localizing  it,  and  it  is  defective  in  less 
important  respects.  I  call  attention  to  it  and  welcome  it, 
because  here  for  the  first  time  Proudhon's  doctrine  of  the 
republicanization  of  specie  is  soberly  championed  by  a  recog- 
nized economist.  This  fact  alone  makes  it  an  important 
sisrn  of  the  times 


296  The  foregoing  indicate.->  that  Mr.  Atkinson's  quarrel 
with  the  Mutual  Credit  System  is  because  it  cannot  be  tacked 
onto  the  prevailing  system  of  money  and  be  made  to  serve 
the  interests  of  the  money-lenders.       By   his  plan  they  could 


WESTRUP-ATKINSOX    CONTROVERSY  137 

still  control  and  manipulate  the  volume  of  money  to  suit  their 
jjurpose,  while  under  the  Mutual  Credit  System  they  will  no 
longer  be  able  to  exercise  that  power,  which,  as  Heywood 
says,  "overshadows  president,  courts  and  pulpit,  and  is  master 
of  majorities  and  armies." 

297  That  this  is  the  secret  of  Mr.  Atkinson's  opposition 
can  readily  be  perceived.  If  it  is  "an  old  familiar  fallacy," 
why  did  he  not  point  out  in  what  tlie  fallacy  consisted? 
"Would  he  not  have  done  so  if  he  could.''  Not  even  when 
offered  an  opportunity  to  answer  my  reply  to  his  rejoinder 
has  he  a  word  to  say.  It  now  remains  for  the  public  to  call 
uj^on  these  great  teachers  of  finance  to  show  wherein  the 
^Mutual  Credit  System  is  wrong  in  principle  or  impracticable, 
or  confess  like  men  that  they  are  unable  to  do  so. 


THE  MUTUAL  CREDIT  SYSTEM. 

29S  Of  the  instruments  that  man  has  devised,  money  is 
one  of  the  most  universal  of  all,  and  its  use  exceeds  that  of 
any  other. 

299  Money  and  its  supply  bear  a  relation  to  the  individ- 
ual different  from  that  of  anything  else.  Mutual  insurance, 
fire  or  life,  comes,  perhaps,  the  nearest  to  it.  A  mutual 
insurance  company  issues  policies  of  insurance,  and  all  to 
whom  it  issues  are  members,  and  they  divide  the  expenses 
and  losses  upon  an  equitable  basis,  and  share  the  advantages 
of  protection.  A  mutual  bank  or  credit  association  adopts 
the  same  idea  of  co-operation  and  furnishes  paper  money  to 
borrowers,  treating  them  as  members,  dividing  the  cost,  and 
losses  if  there  are  any,  and  sharing  the  advantage  of  low  rates 
of  interest  and  plenty  of  money. 

300  But  insurance  policies  and  paper  money  are  totally 
different.  The  one  is  filed  away  for  safe  keeping  and  re- 
mains in  its  hiding  place,  while  the  other  is  constantly  passing 
from  hand  to  hand.  A  policy  of  insurance  is  a  contract,  a 
record  of  an  agreement  It  is  not  in  the  nature  of  a  credit, 
but  it  may  become  credit.  It  is  such  whenever  it  becomes  a 
claim  which  the  insurance  company  must  meet.  But  until 
that  happens  it  is  only  a  promise,  and  one  that  may  never 
mature. 

301  Paper  money,  on  the  contrary,  is  in  the  nature  of  a 
credit.  It  is  a  form  of  credit  (79-91).  Not  all  of  us  are 
affected,  except  remotely,  by  the  soundness  or  unsoundness 
of  insurance.  "VVe  are  not  all  involved  in  the  loss  when  an 
insurance  company  fails,  but  we  are  all  affected  by  the  char- 
acter of  our  money.  We  are  all  involved  in  the  risk  when 
there  is  danger  that  our  paper  money  will  depreciate.     Paper 


THE    MUTUAL    CREDIT    SYSTEM 


139 


money  being  credit  and  having  no  intrinsic  value,  is  worth- 
less wlien  it  ceases  to  pass  in  exchange  for  goods.  This 
being  the  case,  when  we  part  with  that  which  has  value,  to 
be  sure  against  loss,  we  must  know  that  the  money  we  take 
in  exchange  for  it  will  command  for  us  the  equivalent  of 
what  we  parted  with.  When  we  purchase  anything  we  are 
generally  able  to  judge  of  its  value  by  its  appearance.  Then, 
again,  we  have  some  value  in  the  material,  and,  except  in 
rare  instances,  the  purchase  is  not  a  total  loss.  We  may  pro- 
tect ourselves  by  the  condition  that  if  not  satisfactory,  the 
goods  may  be  returned,  or  they  may  be  paid  for  after  having 
been  examined  and  found  as  represented.  We  cannot  protect 
ourselves  against  bad  money  in  the  same  way.  We  could 
not  pay  out  money  with  the  understanding  that  if  it  depreci- 
ated we  would  take  it  back  and  give  an  equivalent  for  it.  It 
must  be  known  to  be  good  when  taken  and  the  transaction 
must  end  with  the  acceptance  of  it. 

303  Money  is  different,  therefore,  from  all  other  things 
we  use.  We  take  it  in  exchange  for  everything,  and  for  the 
sole  purpose  of  exchanging  it  again  for  everything.  We  do 
not  do  thus  with  anything  else.  The  things  we  take  in 
exchange  for  money  are  for  consumption.  Money  is,  then, 
the  one  universal  thing  which  we  exchange  for  everything 
and  which  we  exchange  everything  for. 

303  For  these  reasons  and  for  others  given  elsewhere  (46- 
51)  it  is  the  most  important  as  well  as  one  of  the  most  uni- 
versal instruments  that  we  use.  There  is  more  at  stake  on 
this  one  question  of  money;  it  more  deeply  affects  human 
welfare  than  any  other.  Policies  of  insurance,  title  deeds  to 
property,  promissory  notes  of  individuals,  shares  of  stock  in 
corporations,  like  good  or  bad  articles  of  merchandise,  affect 
only  a  few  individuals.  Poor  bread  or  bad  water  in  any  city 
does  not  affect  (except  remotely)  the  people  who  do  not  live 
there.  We  do  not  get  our  bread  and  our  water  from  one  par- 
ticular source.  But  with  money  it  is  quite  different.  It  must 
necessarily  come  from  one  central  institution,  because  it  must 


T40 


THE    NEW    PHILOSOPHY    OF    MONEY 


be  uniform  and  unquestionably  reliable  so  that  we  can  take  it 
from  any  one  who  offers  it,  without  danger  of  loss. 

304  We  are,  therefore,  all  interested  in  its  being  reliable, 
and  to  the  extent  that  it  can  be  made  safe,  we  all  want  plenty 
of  it.  On  these  two  points  there  is  no  conflict  of  interest.  It 
is  absolutely  universal,  and,  therefore,  if  there  is  any  one 
enterprise  that  above  all  others  should  be  conducted  on  the 
co-operative  or  mutual  plan,  it  is  the  supply  of  money. 

305  The  Greenbacker,  and  the  governmentalist  and  So- 
cialists generally,  advocate  government  control  and  issue  of 
money,  because  that  is  the  way  co-operation  develops  itself 
in  their  mind  (143,  144)-  The  New  Philosophy  of  Money 
teaches  that  co-operation  can  be  carried  on  without  govern- 
ment, and  that  there  is  no  hope  that  government  will  initiate 
it.  That  the  Mutual  Credit  System  alone  can  put  an  end  to 
interests  that  conflict  with  the  general  good;  that  they  are  an 
ever  jDresent  element,  a  concomitant  and  inseparable  part  of 
government;  the  very  object  for  which  it  exists;  the  sole 
purpose  for  which  it  was  called  into  being  and  for  which  it 
is  perpetuated  (134,  143)-  That  the  Mutual  Credit  System 
will  reduce  interest  to  cost  (95,  97,  316),  and  will  unite  in 
one  association  all  women  and  men  of  business  or  enterprise 
of  whatever  nature,  and  will  therefore  transcend  in  its  mag- 
nitude and  importance  government  itself;  besides,  being  on 
a  business  instead  of  a  political  basis,  it  will  necessarily  be 
conducted  more  economically  and  more  honestly.* 


*"As  a  comparison  of  the  cheapness  with  which  the  government 
"postal  monopoly,"  as  Bro.  Cunningham  calls  it,  serves  the  dear  peo- 
ple, we  invite  attention  to  its  money  order  service,  as  compared  with 
the  charges  and  accommodations  given  by  the  express.  An  express 
money  order,  which  costs  the  same  as  a  postal  money  order,  is  good 
at  any  express  office  in  the  United  States,  with  which  the  company 
connects,  merely  requiring  to  be  properly  endorsed  by  the  payee. 
Thus  it  can  be  used  several  times  in  transmitting  small  sums,  while 
the  postal  order  is  only  good  on  the  office  it  is  drawn  for.  The  con- 
sequence is  that  most  business  people  patronize  the  express  in  pref- 
erence to  the  United  States  postal  service.  There  are  many  ways  in 
which  the  regulations  of  the  government  service  is  such  as  to  throw 
most  of  the  business  to  the  express  companies.  The  United  States 
postal  service  is,  as  most  people  are  aware,  much  inferior  to  that  of 


THE    MUTUAL    CREDIT    SYSTEM  I4I 

306  It  will  be  the  carrying  out  the  will  of  the  people 
instead  of  that  of  the  money  joower,  by  the  only  means  that 
is  practicable;  for  government  is  not  only  the  most  difficult 
means  to  employ;  it  is  not  only  the  hardest  thing  to  capture 
in  the  interest  of  the  people,  but  it  can  be  recaptured  by  the 
money  power.  It  is  perpetuating  a  warfare  with  victory 
ever  on  the  side  of  the  unscrupulous;  a  resort  to  methods  that 
are  essentially  reprehensible  because  they  rest  on  force  and 
not  on  consent. 

307  The  use  of  force  to  establish  justifies  its  use  to  over- 
throw, and  human  ivclfare  is  too  precious  to  depend  for  its 
realization  and  perpetuity  on  the  methods  of  brutes  and  sav- 
ages. The  best  system  of  money,  when  fully  comprehended, 
will  be  established,  not  by  government,  b^^t  in  spite  of  it. 
That  tool  of  the  money  power  will  be  used,  as  it  ever  has, 
not  to  promote  the  well-being  of  the  people,  but  in  the  inter- 
est of  a  class. 

308  The  object  of  money  being  to  facilitate,  to  expedite, 
and  make  it  easy  to  exchange  the  products  of  labor,  it  follows 
that  the  best  system  of  money  is  that  one  which  wdll  supply 
the  money  that  wdl  the  most  effectually  accomplish  this  end. 
Now,  if  we  were  all  wise  as  well  as  strictly  honest,  and  no 
one  would  issue  a  promise  to  pay  in  excess  of  his  ability  to 
meet  it,  as  it  would  be  a  great  advantage  to  anyone  to  issue  his 
promise  to  pay  and  obtain  what  he  wanted  by  that  means;  and 
as  it  would  also  be  as  great  an  advantage  to  the  party  selling 
the  goods,  to  take  the  promise  to  pay  and  use  it  as  cash  instead 
of  keeping  an  account,  which  involves  very  much  more  labor 
and  which  he  could  not  use  as  cash,  there  would  be  a  suffi- 
cient volume  of  these  promises  to  pay  circulating  as  money, 
to  render  book  credits  unnecessary.  Everything  bought 
could  be  paid    for,    cash  on  delivery,    which,  to    all    except 


the  private  (express)  service.  The  express  company  delivers  its 
packages  to  the  person  addressed,  in  the  country  towns  as  well  as 
the  cities.  Why  cannot  the  government  afford  to  do  the  same  thing 
for  the  same  price.'" — Farm  Vi'ezi'. 


143 


THE    NEW    PHILOSOPHY    OF    MONEY 


money-lenders,  is  a  result  most  earnestly  to  be  wished  for. 

309  It  is  conceded  that  such  a  system  is  not  possible — it  is 
not  practicable — but  if  it  would  be  a  good  system  if  it  were 
practicable,  what  is  there  about  it  that  renders  it  impractic- 
able? It  certainly  will  not  be  denied  that  the  use  of  money 
instead  of  book  accounts  is  a  desirable  feature.  It  is,  how- 
ever, not  practicable  by  this  method.  We  lack  the  wisdom 
and  the  honesty  to  issue  our  promises  to  pay  within  the  limits 
of  our  ability  to  pay.  But  most  people  jump  to  the  conclu- 
sion that  there  is  no  remedy  for  ignorance  and  dishonesty 
except  to  wait  until  people  become  wise  and  honest,  and 
therefore  it  is  a  waste  of  time  to  look  any  further  in  this 
direction. 

310  This  is  a  mistake.  As  well  might  we  argue  that  we 
could  not  do  without  book  accounts  until  memory  was  perfect 
and  nothing  was  ever  forgotten;  or  that  the  difficulty  of  not 
seeing  well  in  a  poor  light  could  only  be  overcome  by  our 
vision  becoming  powerful  enough  to  penetrate  the  darkness. 

311  It  is  the  overcoming  of  difficulties  and  avoiding  of 
evils  which  exist  in  the  very  constitution  of  things,  that 
diminish  our  burdens  and  adds  to  our  comfort.  Why,  then, 
does  it  not  appeal  to  the  judgment  of  every  individual,  that 
whoever  is  able  and  willing  to  assure  the  fulfillment  of  his 
promise  to  pay  by  pledging  a  sufficient  amount  of  security,  is 
involving  no  one  in  any  risk  ?  The  lack  of  wisdom  and  hon- 
esty to  issue  within  limits  of  ability  to  pay,  is  met  by  a  pro- 
vision that  limits,  and  the  public  is  relieved  from  risk. 

312  We  keep  accounts  because  memory  is  defective. 
Thus  we  overcome  a  natural  difficulty ;  but  how  much  better 
would  it  be  to  substitute  money  for  book  accounts  and  relieve 
ourselves  from  the  labor  they  entail  and  the  inconvenience  of 
being  without  the  goods  and  the  money.  An  argument 
against  an  individual  issue  of  paper  promises  to  pay,  even  if 
all  were  honest  or  if  they  protected  holders  of  these  promises 
by  pledging  security,  is  that  when  wanted  for  payment,  many 
of  them  would  be  so  far  from  home  that  they  would  not  be 


iHE    MUTUAL    CREDIT    SYSTEM  I43 

available.  True  enough,  but  this  argument  is  not  effective 
against  the  mutual  system,  as  these  individual  notes  do  not 
circulate  at  all.  Surely  the  intellect  that  has  invented  the 
differential  calculus;  that  can  foretell  eclipses;  that  has  devised 
bookkeeping;  that  can  manage  a  clearing-house,  can  relieve 
us  from  such  provincialism,  invent  a  substitute  to  take  the 
place  of  these  notes  in  the  performance  of  the  function  of 
money,  while  the  notes  themselves  remain  at  home  in  a  place 
of  safety  to  be  delivered  up  at  their  maturity  for  the  substi- 
tutes that  w^ere  given  in  exchange  for  them.  This  feature 
resolves  another  difficulty  that  might  be  argued  by  an  oppo- 
nent; that  is,  the  great  variety  of  notes,  and,  therefore, 
increased  opportunities  for  counterfeiters.  The  substitutes 
can  be  uniform  to  any  extent  that  is  desirable,  and,  in  fact, 
provided  at  a  single  institution  for  the  w^hole  country. 

313  It  is  claimed  that  life  insurance  should  be  conducted 
on  the  co-operative  or  mutual  plan;  that  the  business  of  life 
insurance,  which  is  to  provide  for  those  dependent  loved  ones 
when  we  pass  to  the  beyond,  is  of  too  serious  a  character  to 
admit  of  its  being  conducted  on  the  ordinary  methods  of  spec- 
ulative business,  and,  for  that  reason,  we  especially  assign  to 
it  the  mutual  plan,  on  the  ground  that  it  is  safer  and  we  run 
less  risk.  But. our  interest  in  a  safe  and  reliable  money  is 
immeasurably  greater  than  our  interest  in  life  insurance.  Not 
all  need  to  carry  insurance,  but  everyone  must  use  more  or 
less  money.  If  the  argument  that  the  mutual  plan  is  best 
and  safest  for  insurance,  is  sound,  why  is  it  not  equally  so 
with  regard  to  money?  If  voluntary  associations  cannot  be 
trusted  to  issue  paper  promises  to  pay  in  the  form  of  money, 
how  can  they  be  trusted  to  issue  paper  promises  to  pay  in  the 
form  of  policies.''  If  voluntary  associations  can  be  trusted  to 
issue  policies  of  insurance,  they  can  also  be  entrusted  with  the 
issue  of  paper  money.  What  folly  to  affirm  that  men  cannot 
be  trusted  as  business  men,  but  as  politicians  they  can!  Does 
a  bond  given  to  government  insure  more  faithful  perform- 
ance of  duty  than  one   given  to  a  business  corporation?     So 


144  THE    NEW    PHILOSOPHY    OF    MONEY 

far  such  has  not  been  the  case,  of  which  the  records  of  con- 
gress and  the  history  of  the  government  for  the  last  thirty 
years  afford  ample  proof. 

314  But  there  is  a  danger  in  government  control  of  money 
of  which  the  people  are  little  aware.  While  ample  resources 
can  be  used  to  advantage  in  case  of  foreign  invasion,  which 
generally  serves  the  pretext  for  their  accumulation  in  the 
hands  of  government,  they  are  ever  a  menace  to  the  cause  of 
justice.  The  hundreds  of  millions  in  coin  piled  up  in  the 
treasury  are  equally  available  against  the  people  as  they  are 
against  their  enemies.*  Had  the  Mutual  Credit  System  pre- 
vailed, the  government  would  have  no  such  resources  ^vith 
which  to  attempt  to  enforce  the  unjust  pretensions  of  the 
privileged  class  as  seems  likely  it  will.  Foreign  invasion  is 
very  remote,  but  in  any  event,  money  in  the  hands  of  people 
who  wish  to  defend  themselves,  is  just  as  available  as  it  would 
be  in  the  hands  of  the  government. 

315  Besides  these,  there  are  yet  other  considerations 
which  we  must  not  overlook.  A  permanent  low  and  unvar- 
ying rate  of  interest,  and  a  never-failing  supply  of  money  are 
indispensable  to  progress  and  prosperity.  These  being  as- 
sured, enterprise  can  be  planned  much  farther  ahead  than 
when  the  rate  of  interest  and  the  supply  of  money  is  uncer- 
tain. The  sjDCCulative  nature  of  "business"  will  give  place  to 
an  effort  to  excel  in  perfection  and  purity  of  product,  the 
demand  for  such  increasing  as  the  people  become  prosperous. 
The  shoddy  and  the  adulterated  will  no  longer  satisfy,  and 
honesty  will,  at  last,  be  the  best  policy.  The  plan  of  the 
Mutual  Credit  System  is  the  only  one  by  which  credit  money 
can  be  substituted  for  commodity  money  and  supply  an  un- 
limited volume  at  an  unvarying  rate  that  will  not  exceed  cost 
(95'  97'  3^^)'     ^^  entirely  changes  the  nature  of  the  transac- 


*  "Army  officers  are  putting  themselves  to  much  trouble  in  devis- 
ing means  for  defending  Washington  against  a  hostile  fleet.  If  they 
will  direct  their  efforts  toward  the  discovery  of  some  way  of  protect- 
ing the  rest  of  the  country  against  Washington  they  may  accomplish 
something  useful,  a  rare  exploit  for  an  army  officer." — Chicago  Times. 


THE    MUTUAL    CREDIT    SYSTEM  I45 

tion  called  borrowing  money.  Under  the  present  system,  the 
borrowing  of  money  is  regarded  as  borrowing  capital,  because 
of  the  coin  basis;  the  borrower,  although  he  may  borrow 
paper  money,  being  entitled  to  coin,  which  is  wealth,  while 
the  paper  is  but  the  representative  of  wealth.  This  fact  is 
put  forward  as  the  ground  for  the  justification  of  interest; 
that,  inasmuch  as  the  borrower  uses  the  capital  (wealth)  of 
another,  he  should  pay  for  its  use,  since  it  enables  him  to  gain 
more  than  he  otherwise  would.  Even  Mr.  Bennett,  who,  as 
the  reader  has  seen,  is  one  of  the  most  uncompromising  foes 
of  interest,  says:  "What  is  really  lent  is  the  wealth  which 
the  dollar  stands  for,  and  the  dollar  is  used  but  as  a  measure 
of  value"  (monetary  unit).*  Under  the  Mutual  Credit  Sys- 
tem, as  just  stated,  the  nature  of  the  transaction  is  entirely 
changed ;  certificates  of  credit  being  furnished  direct  to  the 
borrower  on  his  security  without  the  intervention  of  banker 
or  money-lender.  He  is  by  this  method  relieved  from  the 
necessity  of  using  the  capital  of  another,  availing  himself  of 
his  own  credit  issued  to  him  in  the  form  of  certificates  (144). 
316  The  expense  of  issuing  these  certificates  and  taking 
care  of  the  security,  is  all  the  borrower  is  called  upon  to  pay. 
As  evidence  that  this  expense  would  be  quite  insignificant, 
let  me  quote  Mr.  A.  B.  Hepburn,  ex-comptroller  of  the  cur- 
rency. He  says  in  the  North  American  Review  for  March, 
1893,  speaking  of  "the  total  cost  to  the  government  from  all 
sources  of  the  national  bank  system,"  that  "an  annual  tax  of 
two-fifths  of  one  per  cent  upon  the  circulation  would  have 
defrayed  all  cost  and  redeemed  all  notes  of  all  failed  banks." 
Not  only  is  this  two-fifths  of  one  per  cent  per  annum  suffi- 
cient to  cover  all  expense  of  supervising  these  banks  and  fur- 
nish them  with  their  paper  money,  but  it  would  also  have 
been  enough  to  have  redeemed  all  the  notes  of  all  the  banks 
that  failed.  By  adding  to  this  the  item  of  cost  of  conducting 
business,  which,   according  to  the  commissioners  of  savings 


*  The  attention  of  Mr.  Bennett  and  of  critics  are  especially  called 
to  paragraph  33. 


146  THE    NEW    PiriLOSOPIIY    OF    MONEY 

banks  of  Massachusetts,  averages  in  that  State  three-tenths  of 
one  per  cent  per  annum,  we  have  seven-tenths  of  one  per 
cent  as  the  total  cost  of  furnishing  paper  money,  taking  care 
of  the  security  and  guaranteeing  against  loss.  This  data  is 
the  most  reliable  upon  which  to  forecast  the  rate  the  Mutual 
Credit  Associations  will  have  to  charge  to  cover  their 
expenses. 

317  According  to  the  plan  (see  prospectus)  it  is  proposed 
that  the  General  Clearing-House  Association  shall  supervise 
all  the  local  or  Mutual  Credit  Associations,  print  and  furnish 
all  the  certificates  of  credit,  guarantee  holders  of  these  certifi- 
cates against  their  depreciating,  and  insure  all  property 
pledged  as  security,  against  loss'by  fire  or  otherwise,  I  think 
that  experience  will  prove  that  \\ith  the  exception  of  the 
insurance  of  the  property  pledged,  all  the  other  items  of 
expense  can  be  covered  with  one-half  of  one  per  cent,  for 
failures  among  the  local  associations,  if  there  are  any,  will  be 
insignificant  compared  with  the  failures  of  national  banks. 
An  average  rate  of  insurance  for  the  whole  country,  on  ordi- 
nary risks,  all  in  one  association,  with  no  extra  labor  for  col- 
lecting than  that  involved  in  loaning  the  certificates  of  credit, 
as  it  will  be  included  and  collected  with  the  charge  made  for 
the  loan,  would  probably  not  exceed  another  one-half  of  one 
per  cent,  except  for  extra  hazardous  risks,  in  which  case  an 
additional  charge  can  be  made.  The  borrowing  of  money 
under  the  Mutual  Credit  System,  then,  with  the  very  best 
guarantee  against  loss,  either  by  depreciation  of  the  certifi- 
cates of  credit  or  by  destruction  of  the  property  by  fire  or 
otherwise  would  not  exceed  one  per  cent  per  annum. 

318  This  exposition  of  the  theory  upon  which  interest  is 
supposed  to  be  justifiable,  conclusively  proves  it  to  be  erron- 
eous; and  Mr.  Bennett's  statement,  that  "what  is  really  lent  is 
the  wealth  the  dollar  stands  for,"  is  not  necessarily  true,  but 
only  so  under  the  present  system  of  money. 


CONCLUSION. 

319  The  readers  who  have  followed  closely  the  philoso- 
phy presented  in  this  work,  and  have  carefully  weighed  the 
arguments,  can  scarcely  have  failed  to  realize  the  inadequacy 
of  the  present  method  of  exchange,  with  its  lack  of  provision 
for  a  circulating  medium;  and  many  of  them,  if  not  all,  will, 
no  doubt,  agree  that  the  failure  to  provide  this  most  import- 
ant of  all  instruments  is  the  most  conspicuous  fact  in  the  study 
of  economics;  for  it  cannot  be  claimed  that  the  mediums  we 
have  had  up  to  the  present  time,  have  been  anything  but 
makeshifts,  the  parallel  of  which,  for  inconvenience  and  inad- 
equacy for  the  function  assigned  it,  would  not  have  been  tol- 
erated in  any  mechanical  enterjDrise  since  the  age  of  invention 
has  dawned.  And  that  which  will  amaze  people  the  most 
when  we  provide  a  rational  system  of  exchange  will  be  the 
enormity  of  the  suffering  mankind  has  endured  because  of 
the  absence  of  so  simple  a  device.  We  have  national  hyster- 
ics whenever  manufacturers  of  any  particular  article  of  neces- 
sity form  a  trust  to  control  the  price  of  that  article,  and  some 
of  these  trusts  have  caused  nearly  as  much  public  discussion 
as  a  presidential  campaign.  But  what  are  any  or  all  of  these 
monopolies  compared  with  the  monopoly  of  money.?  The 
exclusive  control  of  one  or  a  dozen  articles  is  of  small  conse- 
quence compared  with  the  control  of  the  medium  of  ex- 
change; yet  people  generally  not  only  do  not  complain  of  the 
control  of  money,  but  actually  think  it  is  necessary. 

320  But  the  failure  to  form  correct  conceptions  with 
regard  to  money  and  how  it  should  be  supplied  is  not  con- 
fined to  the  masses.  "Great  financiers,"  professors,  and  even 
money  reformers  by  scores,  fall  into  errors  that  would  hardly 
seem  possible  to  those  making  a  special  study  of  the  subject. 


148  THE    XEW    PHILOSOPHY    OF    MOXEY 

I  have  endeavored  to  discover  and  point  out  those  errors.  It 
is  encumbent  upon  some  one  to  point  out  those  I  may  have 
made,  and  I  am  prepared  to  consider  any  criticisms.  One 
thing  is  certain;  the  sokition  of  the  money  question,  popu- 
larly speaking,  has  not  yet  been  reached.  The  ultimatum 
presented  by  those  who  have  acquired  the  greatest  degree  of 
popularity,  who  have  attained  the  most  fame  as  writers  on 
banking  and  tlie  money  question  generally,  is  the  alternative 
of  performing  our  exchanges  through  the  medium  of  coin 
money,  or  paper  money  tliat  is  "redeemable  in  coin  on  de- 
mand," bartering  (2,  Si)  one  commodity  for  another,  and 
continuing  the  unbusinesslike  credit  system  I  have  designated 
as  unsecured  credit.  As  a  representative  statement  present- 
ing this  view,  I  call  the  reader's  attention  to  the  concluding 
lines  of  the  Westminster  Review  editorial,  "Free  Trade  in 
Banking."  "Free  trade  principles  must  be  applied  to  bank- 
notes. Every  bank  must  be  at  liberty  to  issue  them  accord- 
ing to  its  means  and  requirements,  as  men  in  other  business 
are  left  to  decide  for  themselves  the  amount  of  credit  they 
shall  seek  to  obtain;  the  sole  condition  7'egtcired  by  the  gov- 
ernment being  that  they  shall  fay  in  coin^  on  demand^  the 
value  of  every  note'''  (323).  [Italics  mine.]  And  also  the  fol- 
lowing from  the  Westminster  Reviciv's  article,  "State 
Tampering  with  Money  and  Banks,"  January,  1S5S: 

321  "Among  unmitigated  rogues,  mutual  trust  is  impossi- 
ble. Among  people  of  absolute  integrity,  mutual  trust  would 
be  unlimited.  These  are  truisms.  Given,  a  nation  made  up 
entirely  of  liars  and  thieves,  and  all  trade  between  its  mem- 
bers must  be  carried  on  either  by  barter  or  by  a  currency  of 
intrinsic  value;  nothing  in  the  shape  of  promises  to  pay  can 
pass  in  place  of  actual  payments;  for,  by  the  hypothesis,  such 
promises  being  never  fulfilled,  will  not  be  taken.  On  the 
other  hand,  given  a  nation  of  perfectly  honest  men — men  as 
careful  of  the  rights  of  others  as  of  their  own,  and  nearly  all 
trade  between  its  members  may  be  carried  on  by  memoranda 
of  debts  and  claims,  eventually  written  off  against  each  other 
in  books  of  bankers,  seeing  that,  as  by  the  hypothesis,  no 
man  will  ever  issue  more  memoranda  of  debts  than  his  goods 


CONXLUSION 


149 


and  his  claims  will  liquidate,  his  paper  will  pass  current  for 
whatever  it  represents,  coin  will  be  needed  only  to  furnish  a 
measure  of  value  and  for  those  small  transactions  for  which  it 
is  physically  the  most  convenient.  These  we  take  to  be  self- 
evident  truths.  From  these  follows  the  obvious  corrollary, 
that,  in  a  nation  neither  wholly  honest  nor  wholly  dishonest, 
there  may  and  eventually  w^ill  be  established  a  mixed  cur- 
rency partly  of  intrinsic  value  and  partly  of  credit  value. 
The  ratio  between  the  quantities  of  these  two  kinds  of  cur- 
rency will  be  determined  by  a  combination  of  several  causes. 

322  Supposing  that  there  is  no  legislative  meddling,  which 
may,  of  course,  disturb  the  natural  balance,  it  is  clear  from 
what  has  already  been  said,  that,  fundamentally,  the  propor- 
tion of  coin  to  paper  will  depend  upon  the  average  conscien- 
tiousness of  the  people.  Daily  experience  must  ever  be 
teaching  each  citizen  which  other  citizens  he  can  put  confi- 
dence in,  and  which  not.  Daily  experience  must  also  ever  be 
teaching  him  how  far  this  confidence  may  be  carried.  And 
thus,  from  personal  experiment,  and  from  current  opinion 
which  results  from  the  experiments  of  others,  every  one  must 
learn,  more  or  less  truly,  what  credit  may  safely  be  given"  (329). 

323  The  first  of  these  two  statements  imposes  a  condition 
to  free  trade,  which  is  illogical.  Free  trade  means  the  aboli- 
tion of  all  restrictions  or  conditions  on  the  part  of  govern- 
ment.    This  is  conclusive,  but  I  shall  refer  to  it  again  (326, 

330)- 

324  The  next  statement  sustains  the  charge  just  made 
that  the  professors  and  popular  writers  know  of  no  means  of 
exchange  except  coin,  paper  money  "redeemable  in  coin,"  or 
"memoranda  of  debts  and  claims  eventually  written  off 
against  each  other  in  books  of  bankers." 

325  How  strange  that  the  idea  did  not  suggest  itself  to 
the  writer  of  the  above  quotation,  or  some  one  of  the  many 
voluminous  writers  known  to  the  public,  that  if  the  payment 
of  these  memoranda  of  debts  and  claims  at  maturity  were 
guaranteed  by  a  deposit  of  ample  security,  they  would  be 
fully  equal  if  not  superior,  as  a  circulating  medium,  to  paper 
money  which  is  not  thus  guaranteed,  but  only  promised  to 
be   redeemed  in  coin  on  demand. 


150  THE    NEW    PHILOSOPHY    OF    MONEY 

326     It  is  perfectly  evident  that  the   Westminster  Review 
knows  of  no  means  of  exchange  except  these  two:    "a  cur- 
rency of    intrinsic  value" — commodity    money — or  "memo- 
randa of  debts    and    claims" — unsecured  credit.*      Here  its 
resources  are  exhausted;  its  ingenuity  is  at  an  end,  and,  as  if 
to  prove  this,  it  states  the  corrolary  that    naturally  follows, 
namely,  that  in  a  community  of  honest  and  dishonest  people 
there  will  be  a  mixed  currency,  partlj^  of  intrinsic  value  and 
partly  of  credit  value,  the  ratio  between  these  two  depending 
upon  the  degree  of  honesty  that  prevails.      Or,  that  if  all 
were  perfectly  honest,  "coin  (intrinsic  money)  will  be  needed 
only  to  furnish  a  measure  of  value,"  etc.       Now,  since  the 
Mutual  Credit  System  will  furnish  certificates  of  credit  (se- 
cured credit  in  the  form  of  paper   money)  which  are  much 
more  convenient,  at  less  cost  than  "memoranda  of  debts  and 
claims  that  have  to  be  written  off  against  each  other  in  books 
of  bankers,"  or  any  other  form  of  unsecured  credit;  and  infi- 
nitely   more  so  than  money  of  "intrinsic  value,"  and  since 
communities  are  actually  miade  up  of  the  honest  and  the  dis- 
honest, why  did  not  the   WesttJiinstei'  Review   advocate  the 
Mutual  Credit  System  instead  of  paper  money  redeemable  in 
coin?     I  have  shown  that  the  "measure  of  value"  is  only  a 
fetish  (161),  and  even  Prof.  Walker  refers  to  it  as  the  "so- 
called  measure  of  value,"  so  that  the  pretext  that  we  need 
gold  as  money  in  order  to  have  a  measure  of  value  is  invalid. 
The  fact  is,  it  speaks  to  the  best  of  its  knowledge.     Like  all 
the  rest  of  us,  it  is  still  ignorant.     But  what  I  blame  it  for  is, 
that  while  it  expresses  as  incomprehensible  the  ignorance  and 
blunders  of   those  who  originated    and  still  perpetuate  the 
existing  system,  it  fails  to  realize  that  "free  trade  in  banking" 


*  Paper  money  in  excess  of  coin  actually  on  deposit  for  its  redemp- 
tion, is  unsecured  credit,  and  may  be  classed  under  the  head  of  mem- 
oranda of  debts  and  claims.  Paper  money  for  which  coin  to  the  full 
amount  is  actually  held  to  redeem  it  with,  ma}^  in  this  case,  be 
classed  as  "currency  of  intrinsic  value,"  since  it  is  not  an  addition 
thereto,  but  circulates  exclusively  in  place  of  such  currency.  Hence 
the  above  statement  is,  strictly  speaking,  correct  (9). 


CONCLUSION  151 

with  the  condition  that  all  paper  money  shall  be  redeemable 
on  demand,  in  coin,  is  not  free  trach  in  bankifig- ;  that  it 
would  perpetuate  the  reign  of  the  "gold  bugs," — the  money 
power  would  rule  just  the  same  as  it  does  now;  that  gold  and 
silver  being  limited  by  nature,  can  be  controlled  and  cornered, 
and  that  those  who  7ni/st  have  it  would  still  be  at  the  mercy 
of  those  who  have  it/  that  while  it  realizes  and  so  skilfully 
points  out  the  evils  we  endure  and  the  cause  that  produced 
them,  it  fails  to  provide  a  remedy;  and  when  a  remedy  is 
offered  it  fails  to  accept  it  or  point  out  wherein  it  is  defective. 
In  1SS9,  before  I  published  "Citizens'  Money,"  seeing  that  it 
advocated  less  restriction  in  the  supply  of  money  and  attrib- 
uted depression  in  trade  to  the  lack  of  freedom  in  exchange, 
I  mailed  to  the  editor  of  that  journal  a  type-written  copy. 
About  a  year  after,  it  was  returned  to  me  with  a  polite  note 
stating  that  he  could  not  use  it.  What  can  the  Westminster 
Review  say  now  about  those  whom  it  accuses  of  what  itself 
is  guilty — its  infatuation  about  the  need  of  a  coin  basis,  while 
its  own  statements  prove  the  absurdity  of  its  position? 
Speaking  of  the  demonetization  of  silver  in  England,  it  says: 
"The  infatuation  of  this  step  it  is  impossible  to  appreciate  or 
account  for.  Continually  the  scarcity  of  money  had  pro- 
duced the  same  disastrous  results.  There  was  a  panic  from 
this  cause  in  1793  and  it  could  only  be  relieved  by  the  issue  of 
£5,000,000  in  Exchequer  Bills;  and  in  181 1  a  similar  crisis 
occurred  which  was  relieved  by  the  same  means."  A  money 
panic  is  relieved  and  comes  to  an  end  by  the  British  treasury 
issuing  bills  to  private  parties  on  liens  on  their  fixed  property. 
Does  it  not  follow  that  if  merchants,  manufacturers  and  other 
business  men  form  an  association  whose  sole  object  shall  be 
to  furnish  a  medium  of  exchange  by  the  issue  of  bills,  not 
only  on  fixed  property  (except  vacant  land)  but  also  on  ware- 
house receipts,  and  which  bills  all  the  members  of  the  associ- 
ation bind  themselves  to  take  in  payment  of  debt  at  their  face 
value,  and  in  exchange  for  commodities  without  discrimina- 
tion in  prices,   that  such  a  system  would   put  an  end  to  a 


152  THE    NEW    PHILOSOPHY    OF    MOXEY 

money  panic  equally  as  well,  and  that  if  all  money  was  there- 
after furnished  by  this  means,  no  subsequent  panic  could  pos- 
sibly occur? 

337  There  is  no  foundation  whatever  for  the  notion  that 
paper  money  issued  by  government  is  more  reliable  than  by 
the  plan  I  propose.  The  Populists  will  probably  make  use 
of  this  item  about  the  relief  afforded  by  the  Exchequer  issu- 
ing paper  money  to  private  parties  (if  they  have  not  already 
done  so),  but  to  do  it  for  temporary  relief,  and  to  make  a 
permanent  thing  of  it,  are  quite  different.  In  the  case  of 
temporary  issue,  the  speculators  have  not  time  to  get  in  their 
work;  besides  the  amount  furnished  was  a  bagatelle  com- 
pared with  the  whole  amount  that  would  be  issued  under  the 
subtreasury  proposition.  Then,  again,  the  Exchequer  Bills 
%vere  issued  at  headquarters  only,  whereas  the  subtreasury 
scheme  contemplates  the  issue  of  government  paper  money 
in  every  city,  thus  multiplying  the  opportunities  for  corrup- 
tion as  the  number  of  cities  in  the  United  States  are  to  one. 
Will  it  be  pretended  that  a  comparatively  few  individuals, 
and  these  politicians,  calling  themselves  the  govei-nment^ 
assuming  control  of  the  issue  of  money,  themselves  to  deter- 
mine on  what,  and  to  attempt  to  force  it  into  circulation  by 
making  it  legal  tender,  would  be  a  more  satisfactory  method 
and  afford  greater  responsibility  than  an  organization  estab- 
lished upon  a  commercial  basis,  with  its  local  associations  in 
every  city  and  a  general  clearing-house  for  all  of  them;  its 
money  not  legal  tender,  but  circulating  on  its  merits,  the 
whole  membership  having  bound  themselves  to  accept  it? 

328  "What  has  got  into  people  in  the  United  States  within 
the  last  few  years,  that  in  proportion  as  the  government  be- 
comes corrupt,  disregards  their  rights  and  proves  that  its 
control  of  money  is  incompatible  with  progress  or  prosperity 
— they  insist  upon  its  offices,  its  intermeddling?  But  more 
of  this  hereafter. 

329  Referring  again  to  the  Westiiiinster  Review :  The 
incongruity  of  the  disjointed,  unsecured  credit  system  of  today 


CONCLUSION 


153 


could  not  be  better  Illustrated  than  it  has  been  by  this  journal. 
"Daily  experience  must  ever  be  teaching  each  citizen  which 
other  citizens  he  can  put  confidence  in,  and  which  not. 
Daily  experience  must  also  ever  be  teaching  him  how  far 
this  confidence  may  be  carried.  And  thus,  from  personal 
experiment  and  from  current  opinion  which  results  from  the 
experiments  of  others,  every  one  must  learn,  more  or  less 
truly,  what  credit  may  safely  be  given."  Alas  for  human 
happiness!  Where  we  looked  for  wisdom,  we  found  foolish- 
ness, where  we  expected  honey,  we  were  given  wormwood 
and  gall.  Why  must  we  be  forever  learning,  forever  exper- 
imenting to  reach  the  unattainable?  The  teaching  we  get 
from  daily  experience  is,  that  confidence  cannot  with  safety 
be  given  under  the  corrupting  system  the  money  power  has 
fastened  upon  us.  Every  one  has  learned  more  or  less  sor- 
rowfully that  the  only  credit  that  can  with  safety  be  given  is 
secured  credit  (83);  and  why  should  we  have  any  other? 
The  peurility  of  this  reasoning  is  simply  amazing.  We  are 
offered  the  consolation  that  during  a  lifetime  we  may  find 
some  by  whom  our  confidence  was  not  betrayed  or  who  were 
successful  and  could  afford  to  be  honest;  but  how  about  the 
dishonest,  the  wrecks,  the  victims  of  monopoly,  of  sharpers, 
and  those  who  are  thrown  out  of  employment,  from  whom 
this  proposition  offers  no  deliverance? 

330  All  these  evils  are  the  effects  of  the  prevailing  unse- 
cured credit  system,  which,  in  turn,  is  the  result  of  the  mo- 
nopoly of  money.  Instead  of  removing  the  monopoly  by 
dissociating  government  from  supplying  or  regulating  money 
and  substituting  for  the  present  system  a  rational  system  of 
secured  credit,  it  is  proposed  to  extend  unsecured  credit  by  the 
unrestricted  issue  of  paper  money  purporting  to  be  redeema- 
ble in  coin  on  demand;  the  government  to  see  that  this  con- 
dition is  complied  with.  On  the  first  page  of  its  article, 
"Free  Trade  in  Banking,  it  defines  free  trade:  "The  prin- 
ciple is  right — perfect  freedom  of  exchange  between  nations 
and  individuals."     And  in  the  face  of  this  definition  it  pro- 


154  '^^^    NEW    PHILOSOPHY    OF    MONEY 

poses  the  issue  of  paper  money,  government  to  see  that  those 
who  issue  it  redeem  it  in  coin  whenever  it  is  demanded. 
This  restriction  limits  freedom,  and  is  therefore  not  "perfect 
freedom."  But  the  Review  has  got  into  a  dilemma  on  an- 
other point  also,  from  which  it  will  be  equally  hard  to  extri- 
cate itself.  It  is  evident  that  we  could  not  have  any  more 
paper  than  there  is  coin  under  the  method  proposed,  without 
the  issuers  taking  the  chances  of  being  called  upon  to  furnish 
something  they  do  not  possess.  The  following  is  its  own 
language:  "The  supjDly  of  gold  and  silver  has  long  been 
inadequate  to  the  requirements  of  commerce.  Even  with  all 
the  forms  of  paper  currency,  still  the  gold  produced  has  been 
insufficient  for  the  growing  wants  of  the  world,"  We  are 
told  that  there  is  not  enough  gold  and  silver  to  supply  a  suf- 
ficient volume  of  money,  and  that  the  way  to  have  the  defi- 
ciency supplied  is  to  leave  each  banker  to  determine  for  him- 
self to  what  extent  he  is  willing  to  take  the  chances  of  being 
caught  with  less  coin  than  he  has  agreed  to  pay  on  demand. 
That  they  must  resort  to  this  overissue  to  avoid  a  scarcity  of 
money,  needs  no  proof.  That  they  would  all  take  chances 
no  one  will  for  a  moment  doubt.  For  an  individual  or  sev- 
eral of  them  to  be  able  to  loan  their  unsecured  credit  to 
responsible  parties  on  good  security,  and  get  good  pay  for 
doing  so,  is  too  much  of  a  temptation  to  be  resisted.  If  this 
paper  is  taken  by  everybody  and  no  one  demands  coin,  or  not 
enough  to  require  interference  on  the  part  of  government, 
business  will  go  on  with  a  rush  for  a  time,  but  the  inevitable 
result  would  be  an  enormous  inflation  of  paper  money. 
The  indiffei'ence  on  the  part  of  the  people  to  demand 
coin  would  encourage  an  ever-increasing  overissue,  as  the 
drawing  of  interest  on  one's  promise  to  pay  is  so  allur- 
ing; so  that  a  final  crash  would  be  certain  and  unavoid- 
able. There  would  be  a  run  on  most  of  the  banks  and 
the  great  majority  of  them  would  go  under.  If,  on  the 
other  hand,  the  people  were  constantly  to  demand  coin, 
very  little  increase  in  the  volume  of  money  would  take  place 


CONCLUSION  155 

and  we  should  continue  to  suffer  from  a  dearth  of  money. 
331  Reduced  to  its  last  analysis,  then,  the  West?}iinstcr 
Review^ s  proposition  affords  us  the  alternatives:  paralysis  of 
business  from  lack  of  money,  continued  poverty,  crime  and 
revolution;  or  inflation,  wildcat  banking,  wild  speculation, 
a  general  crash,  blasted  hopes,  pandemonium,  poverty,  crime, 
and,  finally,  also  revolution.  But  if  bankers  may  issue  j^aper 
money  redeemable  in  coin,  why  may  not  merchants,  manu- 
facturers and  others,  issue  paper  money  redeemable  in  other 
products?  The  bills  issued  by  bankers  are  the  banker's 
credit,  and  they  are  unsecured  credit.  If  bankers  may  use 
their  credit  wherever  they  can,  why  may  not  everyone  else 
do  the  same?  Why  do  not  people  see  that  if  this  right  were 
recognized  and  government  ceased  entirely  from  meddling  in 
the  matter,  the  very  importance  of  the  question  would  call 
forth  the  best  talent  to  devise  a  system  that  would  be  satis- 
factory. If  the  Mutual  Credit  System  can  be  improved  upon, 
no  one  could  prevent  it  and  all  would  be  benefited  by  the 
improvement.  Free  trade  in  banking  means  that  every  one 
has  the  right  to  issue  his  own  money  and  pass  it  out  into  cir- 
culation as  best  he  can.  If  this  right  (and  it  is  but  one's 
right  to  his  credit)  were  suddenly  demanded  by  the  majority, 
and  all  restrictions  were  wiped  off  the  statute  books,  and  peo- 
ple commenced  offering  their  paper  money,  the  boards  of 
trade  m  every  city  would  at  once  call  meetings  to  devise 
means  for  providing  a  reliable  and  uniform  medium  of  ex- 
change. All  business  men  and  women  would  be  aroused  to  a 
profound  and  exhaustive  discussion  of  the  money  question. 
All  sides  would  then  get  a  fair  hearing;  the  best  system 
would  naturally  come  to  the  surface,  and  the  fittest  would 
survive.  If  we  did  not  get  a  perfect  system  at  first  improve- 
ments would  be  added,  because,  as  stated  elsewhere  (301-304) 
it  is  the  one  thing  in  which  all  producers  and  exchangers  of 
products  are  mutually  interested ;  there  is  no  conflict  of  inter- 
est whatever;  the  only  interest  antagonized  would  be  the 
money-lenders'.     The  establishment  of  the  best  system  is  as 


1  56  THE    NEW    PHILOSOPHY    OF    MONEY 

certain,  therefore,  as  the  continuance  of  the  human  race.* 
332  But  there  is  another  point  we  must  not  overlook  in 
the  issue  of  bills  by  bankers  as  proposed  by  the  Westminster 
Review.  These  bankers  would  either  hold  coin  to  the 
amount  of  bills  issued  or  they  would  not.  If  they  did,  how 
would  we  avoid  scarcity  of  money?  But,  as,  of  course,  they 
would  not,  it  follows  that  the  bills  they  issue  are  their  unse- 
cured credit.  How  inconceivably  stupid!  All  those  who 
have  good  security,  instead  of  forming  into  a  solid  financial 
institution  to  issue  bills  against  the  security  they  actually  pos- 
sess, by  a  method  that  would  be  safe  and  satisfactory  to  every- 
body, and  which  could  not  possibly  be  manipulated  or  entail 
loss  upon  any  one,  are  coerced  into  helping  the  banker  draw 
interest  on  what  he  does  not  possess.  In  other  w^ords,  instead 
of  each  using  his  own  individual  secured  credit  at  one  per 
cent  or  less,  he  has  to  pay  from  6  to  100  per  cent  for  the 
unsecured  credit  of  some  one  else.  Thus  the  banker  lives  on 
the  interest  on  what  he  owes,  and  the  public  takes  the  chances 
of  his  paying  his  debts.  We  may  laugh  at  the  absurdity,  but 
it  is  precisely  what  we  have  been  doing  since  the  invention  of 
paper  money.  The  money-lenders  have  deluded  the  people 
into  believing  in  the  "standard  of  value"  fake,  and  have  thus 
controlled  the  enormous  advantage  of  paper  money  in  their 
own  interest;  whereas,  if  paper  money  had  been  used  in  the 
interest  of  the  borrower  since  the  date  of  its  invention,  we 
should  not  now  be  mourning  poverty,  corruption,  vice  and 
crime.  The  policeman's  club  would  be  a  museum  curiosity, 
and  the  gatling  gun  never  would  have  been  invented.  There 
never  would  have  been  any  call  for  it.  There  are  other  crit- 
icisms that  might  be  fairly  made  of  the  Westminster  Re- 
view''s  article;  but  the  one  purpose  for  which  it  was  repro- 


*  At  the  recent  annual  meeting  of  the  American  Association  for 
the  Advancement  of  Science,  vice-president  Farquhar,  in  his  address 
in  the  section  of  economic  science  and  statistics,  upon  a  State  mone- 
tary unit,  favored  the  abandonment  of  attempts  to  establish  a  legal 
tender  by  legislation,  and  the  leaving  of  the  question  to  settle  itself. 
— Pojiular  Science  Mo7ithly,  October,  iSgj. 


CONCLUSION  157 

duced,  namely,  to  show  in  an  authentic  manner  a  history  of 
money  panics,  and  the  effects  of  money  monopoly  — the  acts 
of  government — in  England,  has  been  accomplished.  My 
criticisms  are  made  with  a  view  of  pointing  out  the  errors  of 
the  old  and  proving  the  correctness  of  the  new  philosophy  of 
money. 

333  As  a  specimen  of  tlie  same  kind  of  reasoning  and  of 
the  absence  of  a  real  appreciation  of  what  is  needed,  I  will 
now  present  a  statement  from  another  source  —  an  extract 
from  a  recent  pamphlet,  entitled  "Bimetallism,"  by  Prof. 
Francis  A.  Walker,  author  of  "Money,"  "Political  Econ- 
omy," and  several  other  works;  superintendent  of  the 
United  States  Census  of  18S0,  and  president  of  the  Massa- 
chusetts Institute  of  Technology.  "My  subject  is  Bimet- 
allism. It  is  not  to  be  disguised  that  there  is,  on  the  part  of 
many  public-spirited  citizens  here  at  the  east,  a  certain  indis- 
position to  consider  this  subject  at  the  present  time,  a  shrink- 
ing from  the  questions  it  involves.  The  reasons  for  this  are 
not  far  to  seek.  In  the  first  place,  many,  in  opposing  the 
free  coinage  of  silver  and  working  for  the  repeal  of  the  pur- 
chase clauses  of  the  Sherman  Act,  have  thrown  themselves 
naturally,  though  by  no  means  logically,  into  an  attitude  of 
antagonism  towards  silver,  which  is  not  in  conformity  with 
the  traditions  of  the  American  people,  and  which  they  would 
not  have  taken  but  for  the  severe  struggle  of  the  last  three 
years,  and  especially  of  the  past  summer.  In  the  second 
place,  people  are  tired  and  worn  out  with  the  still  recent 
contest  over  free  coinage  and  the  purchase  of  silver  bullion, 
^and  want  a  rest  from  the  subject.  This  mental  attitude, 
again,  is  natural  enough,  but  it  is,  nevertheless  wrong.  JVo 
question  is  ever  settled  u?itil  it  is  settled  right.  The  re- 
peal of  the  purchase  clauses  of  the  Sherman  Act  settled 
nothing.  It  but  opened  the  way  for  a  proper  treatment  of 
the  financial  problem.  That  problem  must  be  grafplcd 
ivith  until  it  is  solved.     There  is  neither  statesmanship  nor 


158  THE    NEW    PHILOSOPHY    OF    MONEY 

good  citizenship  in  seeking  to  evade  or  procrastinate  the  issue 
it  jDresents. 

334  "Another  cause  which  helps  to  produce  a  certain  in- 
disposition to  consider  the  silver  question  is  found  in  the 
apprehension  of  many  persons  well  inclined  towards  bimet- 
allism, that  to  raise  this  issue  will  excite  our  fellow-citizens 
at  the  south  and  west  and  increase  their  urgency  for  free 
coinage.  This  view  is  held  in  good  faith,  but  I  must  regard 
it  as  wholly  mistaken.  Our  southern  and  western  friends 
have  got  hold  of  a  half  truth,  or  rather  a  half  truth  has  got 
hold  of  them,  and  has  produced  among  them  something  very 
like  a  fanaticism  dangerous  to  the  republic.  The  half  of  the 
truth  regarding  money  which  actuates  the  south  and  west  is 
that  a  diminishing  money  supply  constitutes  a  great  evil. 
The  way  in  which  the  gold  monometallists  seek  to  meet  this 
is  by  opposing  to  it  a  half  truth  of  their  own,  namely,  that 
an  inflated,  depreciated  and  rapidly  fluctuating  money  is  a 
fruitful  source  of  social  and  industrial  mischief.  But  a  half 
truth  which  excites  to  fanaticism  has  never  yet  been  success- 
fully opposed  by  another  half  truth  appealing  to  conserva- 
tism. The  only  way  to  meet  the  dangerous  demands  from 
the  west  and  south,  is  by  telling-  ajtd  tirging  the  zvhole 
trtith^  which  in  this  matter  is  found  in  bimetallism — bimet- 
allism on  a  broad,  international  basis,  which  would  both 
secure  the  desired  stability  of  the  so-called  standard  of  value 
and  prevent  the  incontestable  evils  of  a  diminishing  money 
supply."     [The  italics  are  mine.] 

335  Mr.  Walker's  remedy  for  the  scarcity  of  money  is 
international  bimetallism.  That  is  to  say,  he  believes  in  co- 
operating with  other  nations  with  a  view  of  bringing  silver 
coin  Into  more  general  use,  so  as  to  have  more  money  with- 
out depreciation.  Of  course  the  Inevitable  corrolary  follows, 
even  if  it  were  for  a  moment  conceded  to  be  a  remedy,  that 
If  other  nations  will  not  co-operate,  we  have  no  alter- 
native but  to  go  on  with  the  limited  volume  of  money 
that     periodically     paralyzes     production     and      exchange. 


CONCLUSION  159 

To  what  a  pass  have  we  come!  It  is  not  Nature  that 
has  placed  obstacles  in  the  way  of  continued  production  and 
exchange,  but  man's  cupidity  on  the  one  hand  and  his  igno- 
rance on  the  other.  Nature  is  always  ready  to  serve  us  if 
we  only  adopt  her  methods.  But  in  matters  of  exchange  we 
proceed  in  open  violation  of  her  teachings,  as  we  learn  from 
the  records  of  the  past  and  from  observation.  We  make  an 
arbitrary,  artificial  regulation  that  is  impossible  to  be  com- 
plied with.  The  use  of  gold  and  silver  as  media  of  exchange 
is  not  a  condition  imposed  by  Nature.  It  is  a  superstition 
that  dominates  men,  that  such  media  is  necessary.  They  de- 
clare that  these  metals  must  be  the  basis  of  exchange,  and 
persist  in  perpetuating  the  absurdity,  although  every  money 
panic  is  traced  to  this  as  the  cause.  There  is  not  enough; 
and  if  a  sufficient  amount  were  found  to  give  us  plenty  of 
money  at  present  weight  and  value  of  coin,  it  would  not 
afford  us  relief,  because  Nature's  methods — supply  and  de- 
mand—cannot be  set  aside,  and  the  purchasing  power  of  the 
coin  would  diminish  precisely  in  proportion  to  the  increase 
in  the  supply.  This  cannot  be  denied  either  by  the  mono- 
metallists  or  the  bimetallists,  for  it  is  one  of  their  cardinal 
doctrines  that  "increase  in  the  volume  of  money  reduces  its 
purchasing  power."  They  nevertheless  persist,  and  until 
we  emancipate  ourselves  from  their  control  of  money  we 
must  endure  the  penalty.  In  the  whole  domain  of  human 
activities,  inventive  genius  is  prompt  with  needed  innova- 
tions, but  conservatism  stands  guard  on  the  highways  of 
exchange,  lest  iconoclastic  reform  should  demolish  its  golden 
calf. 

Bo7ii(m  magis  careiido  quam  frtiejtdo^  cernitur . 
336  Man  never  is^  but  always  to  be  blessed.  If  the 
rocks  would  only  cease  to  yield  the  "precious"  metals,  this 
might  be  changed.  We  should  then  have  neither  monomet- 
allists  nor  bimetallists,  and  rational  views  on  the  subjects  of 
money  and  value  might  be  confidently  looked  for,  even 
among  the  professors  and  "great  financiers."     As  the  "stand- 


l6o  THE    NEW    PHILOSOPHY    OF    MONEY 

ard  of  value"  we  are  said  to  have  could  not  then  exist,  they 
might  "catch  on"  to  the  fact  that  the  monetary  unit,  and  not 
a  measure  or  standard,  is  the  means  by  which  we  compre- 
hend and  express  relative  value;  that  when  we  are  told  the 
value  of  this  object  is  five  dollars,  and  of  that,  three  dollars, 
and  of  another,  two  dollars,  we  have  no  difficulty  in  forming 
a  clear  conception  of  what  it  is  intended  to  convey,  of  the 
relative  value  of  these  different  articles.  And,  of  course,  the 
same  is  true  of  the  fractions  of  the  monetary  unit — cents — as 
of  the  unit  itself.  Value  being  only  a  relation,  if  all  parties 
express  value  by  means  of  the  same  term  as  the  monetary 
unit,  there  cannot  possibly  be  any  misunderstanding.  This 
term — the  monetary  unit — is  but  an  abstraction.  Value  be- 
ing established  by  supply  and  demand,  we  can,  by  the  use  of 
this  unit,  from  its  smallest  fraction  to  any  multiple  of  the 
unit  itself,  express  value  to  any  amount.  And  I  most  em- 
phatically declare,  without  fear  of  successful  refutation,  that 
it  never  has  been  anything  else  but  an  abstraction  since  the 
invention  of  paper  money,  just  the  same  as  it  undoubtedly  is 
In  bookkeeping  "money  of  account,"  so-called.  That  mono- 
metallism and  bimetallism,  instead  of  helping  to  convey  a 
definite  idea  of  value  by  establishing  a  "measure"  or  "stand- 
ard" of  value,  are  but  a  disturbing  element  in  value  in  ex- 
change.* That  previous  to  the  invention  of  paper  money, 
all  exchanges  were  in  the  nature  of  barter.  The  people 
exchanged  commodities  for  commodity  money,  which  is  an 
exchange  of  values,  and  is  therefore  barter  (Si,  ^S).  We 
use  the  term,  dollar,  because  it  is  more  convenient  than  it 
would  be  to  express  value  in  the  smallest  fraction;  in  which 
case  we  should  need  no  term,  but  simply  say  one,  or  any 
multiple  of  one.  Thus  one  hundred  would  be  what  we  now 
mean  when  we  say  one  dollar;  500,  five  dollars;  5,000,  fifty 
dollars;  5,678,  fifty-six  dollars  and  seventy-eight  cents  and  so 
on.     The  prevailing  method  of  conveying  from  one  mind  to 


*  See  foot-note,  page  94. 


CONCLUSION 


i6i 


another  the  vahie  of  objects  being  satisfactory,  we  effect  ex- 
changes of  values  by  one  of  two  methods,  barter  or  credit. 
Barter  is  the  exchange  of  one  object  of  value  for  another 
object  of  value.  To  exchange  for  coin,  therefore,  is  a  spe- 
cies of  barter.  To  exchange  for  paper  money  is  a  credit 
transaction,  because  paper  money  is  a  form  of  credit.  It  is 
distinguished  from  ordinary  credit  which  is  not  a  settlement 
on  the  spot,  by  designating  it  secured  credit  (82,  84).  If  we 
express  the  value  of  all  objects  and  divide  up  secured  credit 
and  issue  it  in  the  form  of  paper  money,  using  the  same  de- 
nominator or  monetary  unit  in  both  cases,  any  given  amount 
of  either  must  be  equivalent  to  the  same  amount  of  the  other; 
and  if  this  secured  credit  is  redeemed  at  its  face  value  in  any 
commodity  at  its  market  value,  it  can  be  transferred  from 
one  to  another  with  perfect  safety.  We  only  need,  then,  to 
provide  for  its  redemption  to  make  its  use  perfectly  safe. 
We  have  no  need,  therefore,  of  a  coin  made  of  a  definite 
quantity  of  some  special  metal  to  inform  us  how  much  is  a 
dollar's  worth,  for  we  can  ascertain  that  fact  by  consulting  a 
price  list;  the  market  value  of  a  commodity  will  always  give 
us  the  exact  amount  that  can  be  had  for  a  dollar.  The 
amount  of  gold  a  paper  dollar  (that  is,  secured  credit)  will 
buy,  is  a  dollar's  worth  of  gold,  and  so  with  all  other  articles 
or  commodities.  The  essential  item,  with  the  exception  of 
precautions  against  counterfeiting,  is  the  provision,  when  the 
secured  credit  is  granted,  that  its  redemption  at  its  face  value 
and  at  the  time  agreed  upon,  be  imperative  and  unavoidable. 
Under  such  a  system  there  can  be  no  disturbing  element  in 
value,  such  as  gold  is  and  always  has  been. 

337  The  advantage  that  the  Mutual  Credit  System  pos- 
sesses in  the  matter  of  redemption  of  secured  credit  is  that 
parties  can  redeem  the  amount  of  secured  credit  that  has  be- 
come due,  by  exchanging  anything  they  can  for  it,  instead  of 
being  compelled  to  furnish  a  definite  quantity  of  some  special 
commodity,  as  is  the  case  when  paper  money  is  issued  on 
gold  and  the  gold  is  demanded.     What  constitutes  a  dollar's 


1 62  THE    NEW    PHILOSOPHY    OF    MONET 

worth,  then,  in  any  commodity,  is  the  amount  of  that  com- 
modity that  is  offered  in  exchange  for  a  dollar  of  secured 
credit.  What  constitutes  a  "dollar"  of  secured  credit  is  the 
certificate  of  credit  of  that  denomination  that  is  issued  by 
the  Mutual  Credit  Association,  and  which,  therefore,  the 
party  who  obtained  it  from  that  association  has  pledged 
himself  to  redeem  with  one  dollar's  worth  of  market  value, 
and  has  guaranteed  that  he  will  fulfil  that  pledge  by  deposit- 
ing a  sufiicient  amount  of  security.  So  with  all  certificates 
of  credit,  of  whatever  denomination. 

33S  But  to  return  again  to  the  subject  of  Prof.  Walker's 
pamphlet,  w^e  must  confess  that  he  says  some  good  things. 
For  instance:  "No  question  is  ever  settled  until  it  is  settled 
right."  .  .  "That  [financial]  problem  must  be  grappled 
with  until  it  is  solved.  There  is  neither  statesmanship  nor 
good  citizenship  in  seeking  to  evade  or  procrastinate  the  issue 
it  presents."  These  statements  express  the  right  sentiment, 
and  it  is  to  be  hoped  that  he  will  neither  evade  nor  procrasti- 
nate the  issue  herein  brought  to  his  notice.  Why  the  fact 
that  a  diminishing  money  supply  constitutes  a  great  evil,  and 
that  an  inflated,  depreciated  and  rapidly  fluctuating  money  is 
a  fruitful  source  of  social  and  industrial  mischief,  should  be 
called  "half  truths,"  is  not  clear.  They  are  each  of  them 
whole  truths  of  the  most  vital  importance.  But  does  Prof. 
Walker  comprehend  the  real  issue  this  financial  problem  pre- 
sents? It  would  seem  that  "public-spirited  citizens  at  the 
east,"  as  elsewhere,  who  "shrink  from  the  question  it  in- 
volves," have  a  keener  insight  into  the  "issue  it  involves"  than 
has  Prof.  Walker;  and  that  he  attributes  their  indisposition  to 
a  wrong  cause.  The  real  issue.  Prof.  Walker,  is  the  wresting 
from  government  its  usurped  power  of  the  control  and  reg- 
ulation of  the  supply  of  money.  The  speculating  capitalist 
sees  this  sooner  than  the  professors  do.  To  them  (the  capi- 
talists) this  is  the  "fanaticism  that  is  dangerous  to  the  repub- 
lic,"— the  republic  that  has  built  them  up  and  crushed  the 
toiler.       But  a  republic  is  only  an  institution.      Why  does 


CONCLUSION  163 

Prof.  Walker  manifest  so  much  concern  about  an  institution? 
Are  institutions  more  sacred, — are  they  still,  at  this  late  day 
paramount  to  the  liberty  and  prosperity  of  the  people? 
Take  away  the  people's  credit,  give  it  into  the  hands  of  a 
few  to  be  farmed  out  at  their  discretion,  and  your  republic, 
or  whatever  vou  call  your  political  organization,  is  doomed. 
And  it  is  right  that  it  should  be.  Man  and  his  well-being  is 
the  subject  to  consider, — not  institutions.  They  are  ever 
changing  and  necessarily  must  change  as  man  progresses. 
He  must  change  his  institutions  to  suit  his  wants,  or  cease  to 
progress  in  order  to  remain  in  conformity  with  his  institu- 
tions.    Which  shall  it  be? 

339  Discussing  the  effect  of  law  upon  value,  Prof. 
Walker  says:  "As  regards  bimetallism,  then,  the  question 
simply  is:  Can  government  set  in  motion  any  economic 
force  which  will  affect  the  relative  values  of  gold  and  silver? 
I  answer,  yes,  incontestably;  and  that  force  is  one  of  enor- 
mous scope  and  reach.  By  declaring  the  two  metals  indiff- 
erently legal  tender  in  the  payment  of  debts,  at  a  certain 
ratio,  it  can  at  once  and  powerfully  influence  the  demand  for 
one  and  the  other  of  the  two  metals.  This  was  exactly  what 
France  did  by  the  law  of  1S03,  which  established  the  bime- 
tallic system.  By  that  law  France  declared  that  an  ounce  of 
gold,  in  coined  money,  should  have  precisely  the  same  power 
to  pay  debts  as  that  possessed  by  fifteen  and  one-half  ounces 
of  silver,  in  coined  money.  The  operation  of  this  principle 
was  simple,  instantaneous,  automatic  and  of  overwhelming 
force."  Evidently  Prof.  Walker  is  not  an  evolutionist,  or  he 
would  not  trammel  progress  with  government  supervision 
and  dictation.  If  there  never  had  been  government  control 
of  money,  there  would  never  have  been  a  money  panic. 
The  inventive  ingenuity  of  man  would  never  have  tolerated 
a  scarcity  of  money  if  superstition  that  government  must 
control  money  had  not  dominated  him.  Scarcity  of  money 
is  the  effect  of  law.  Men  have  more  respect  for  law  than 
for  their  rights.      Otherwise  they  would  not  tolerate  laws 


164  THE    NEW    PHILOSOPHY    OF    MONEY 

that  interfere  with  their  rights.  The  class  that  own  all  the 
gold  and  silver  coin,  the  money-lenders — and  who  are  always 
the  ruling  class — procure  the  enactment  of  laws  compelling 
the  use  of  coin  as  money,  the  legal  tender  clause  being  their 
trump  card.  They  make  us  use  their  coin,  and  the  tribute 
they  levy  on  us  for  its  use  is  more  than  the  net  increase  of 
wealth  (121).  Of  course  they  do  not  take  more  than  the  net 
increase.  It  would  be  difficult  for  them  to  get  more  than 
there  is,  but  they  demand  all  that,  and  their  watch-dog,  that 
the  people  have  elected  to  govern,  see  that  they  get  it.  Gold 
monometallism  means  that  those  who  own  the  gold  coin 
want  a  monopoly  of  this  lucrative  business.  Bimetallism 
means  that  those  interested  in  silver  want  a  share  of  the 
spoils.  The  people  will  have  to  repudiate  both  or  abandon 
all  hope  of  liberty.  Prof.  Walker  is  wrong.  Government 
can  set  in  motion  a  force,  but  it  is  not  an  economic  force;  it 
is  the  effect  of  arbitrary  interference  with  economic  force. 
All  interference  with  natural  and  free  exchange  will  affect 
relative  values,  but  by  what  right  government  may  thus 
interfere  with  demand  and  supply  he  does  not  say.  That 
governments  can  call  into  play,  in  monetary  affairs,  a  force 
of  "enormous  scope  and  reach,"  let  the  following  extract 
from  the   Westminster  Review  testify. 

340  "Lord  Ashburton,  one  of  its  [the  Bank  of  England] 
prime  champions,  said:  'Our  monetary  laws  put  it  in  the 
power  of  a  few  shrewd  capitalists  so  to  contract  the  supply 
of  gold  as  to  embarrass  the  bank  and  nearly  ruin  the  nation.' 
[They  have  done  the  same  in  this  country  and  have  com- 
pletely ruined  the  "nation." — Author.]  Lord  Overstone, 
another  advocate  of  the  system,  said:  'Against  the  actual 
exhaustion  of  its  treasures,  through  foreign  exchange,  the 
bank  has  the  power  of  protecting  itself.  But  to  do  this,  she 
must  produce  a  pressure  upon  the  money  market,  ruinous  for 
its  suddenness  and  severity.  She  must  save  herself  by  the 
ruin  of  all  around  her'."  Without  extending  our  inquiry 
further,  it  has  been  clearly  demonstrated  that  the  two  nations 


CONCLUSION  165 

which  boast  of  being  the  foremost  in  civilization, —  the 
United  States  and  Great  Britain — both,  by  the  monopoliza- 
tion of  the  medium  of  exchange  have  instituted  and  perpetu- 
ated poverty,  and,  consequently,  all  its  concomitant  evils, — 
misery,  immorality  and  crime.  The  amount  of  mental  and 
physical  torture  thus  inflicted  by  government,  we  shall  never 
know.  Instead,  therefore,  of  government  meriting  our  ad- 
miration and  respect,  as  the  votaries  of  authority  and  force 
claim  it  should,  after  a  thorough  examination  of  the  subject 
it  calls  forth  a  most  profound,  solemn  and  spontaneous  exe- 
cration. 

341  Does  the  reader  want  more  evidence?  He  shall  have 
it,  and  from  this  same  Francis  Amasa  Walker.  "Look  at 
the  financial  and  industrial  history  of  the  past  few  years! 
Everywhere  the  stockholder  is  giving  way  to  the  bondholder; 
everywhere  we  hear  of  receiverships;  everywhere  the  mort- 
gagee is  coming  into  possession;  everywhere  the  weight  of 
the  dead  hand  is  felt  continually  increasing."  That  Gen. 
Francis  Amasa  Walker  is  innocent  of  any  knowledge  of  the 
crime  and  usurpation  of  government  in  controlling  and  lim- 
iting the  supply  of  money  is  proved  by  another  statement 
he  makes:  "There  will  be  panics,  crises  and  hard  times 
under  any  system."  Now,  bear  in  mind  that  this  statement 
comes  from  a  man  on  whom  the  degree  of  A.  M.  was  con- 
ferred by  Amherst  College,  in  1S63,  and  by  Yale  College  in 
1873.  L^ter,  these  same  institutions  honored  him  "with  the 
Ph.  D.  and  L.  L.  D.;  Harvard  in  1SS3,  Columbia  in  18S7, 
and  St.  Andrew's,  Scotland,  in  18S8.  He  was  United  States 
Commissioner  to  the  International  Monetary  Conference  in 
Paris,  in  1878,  and  was  elected  the  same  year  to  the  National 
Academy  of  Sciences.  Is  president  of  the  American  Statis- 
tical Society  and  of  the  American  Economic  Association,  and 
also  an  honorary  fellow  of  the  Royal  Statistical  Society  of 
London.  I  m.ean  no  disrespect  to  this  "honorary  fellow"; 
on  the  contrary,  I  wish  to  show  that  he  is  no  worse  than 
other  college-bred  men  whose  early  training  is  a  process  of 


l66  THE    NEW    PHILOSOPHY    OF    MONEY 

literary  cramming  instead  of  developing  individuality  and 
independence  of  thought,  by  which  means  evolution  of  right 
and  the  triumph  of  justice  would  come  in  their  natural  order. 
But,  instead,  error  holds  the  fort  against  fact,  dogma  wields 
a  club,  reason  is  prostrate  and  brutal  conflict  seems  inevitable. 
France  did  not  solve  the  economic  question  by  the  establish- 
ment of  the  bimetallic  system  in  1S03,  and  which  lasted 
about  seventy  years;  it  having  been  abandoned  in  1S74. 
Neither  does  Mr.  Walker  expect  it  would  if  reestablished, 
for  he  says:  "There  will  be  panics  and  hard  times  under 
any  system."  What,  then,  have  we  to  hope  for  from  the 
bimetallic  system  ?  Mr.  Bennett  has  demonstrated  that  inter- 
est is  impossible.  I  have  shown  that  it  can  be  abolished. 
Mr.  Walker  ignores  the  issue.  In  18S8  I  mailed  him  a  type- 
written copy  of  my  essay,  "Citizens'  Money."  Later,  I 
received  a  note  from  him,  stating  that  our  views  on  the  issue 
of  paper  money  were  so  far  apart  that  it  was  useless  to  dis- 
cuss it.  Mr.  Walker  mourns  over  the  financial  and  indus- 
trial history  of  the  past  few  years,  and  offers  only  a  palliative 
that  is  impracticable  and  announces  a  remedy  impossible. 
Yet  the  system  herein  proposed,  the  very  one  he  would  not 
condescend  to  discuss,  is  a  practicable  and  effectual  remedy 
for  all  currency  evils,  as  time  will  prove. 

343  Another  professor  whom  I  am  called  upon  to  criti- 
cize is  William  Yi.  Folwell,  of  the  University  of  Minnesota, 
who  also  refused  to  discuss  the  merits  of  the  Mutual  Credit 
System.  This  gentleman  has  quite  a  reputation  in  the  north- 
west as  a  political  economist;  was  at  one  time  president  of 
the  University.  I  called  on  him  soon  after  I  commenced 
my  projDaganda  work  in  this  vicinity,  had  a  pleasant  talk 
with  him  and  presented  him  with  copies  of  my  two  pamph- 
lets, with  the  understanding  that  he  would  give  me  a  written 
expression  of  his  opinion  in  regard  to  the  new  money  system 
they  proposed.  About  six  months  passed,  during  which 
time  I  did  not  hear  from  him.  I  then  called  on  him,  and 
also  once  since  then,  but  I  could  get  nothing  definite  or  satis- 


CONCLUSION  167 

factory  from  him;  his  excuse  being  that  he  had  been  too 
busy  with  his  duties,  but  he  promised  each  time  to  give  the 
matter  his  attention  as  soon  as  circumstances  would  permit. 
About  the  ist  of  March,  1894,  I  wrote  him  a  note  inviting 
him  to  address  the  Financial  Club  on  the  subject  of  the 
Mutual  Credit  System.      The  following  is  his  reply: 

Minneapolis,  Minn.,  March  S,  1S94. 
My  Dear  Sir: 

Your  favor  has  remained  unanswered  because  I  have 
been  busied  with  my  college  examinations  and  was  out  of 
town  over  Sunday. 

I  am  obliged  to  decline  your  polite  invitation  to  address 
the  Financial  Club  on  the  subject  named,  because  I  cannot 
now  take  time  from  my  duties  to  make  the  necessary  invest- 
igation. 

I  must  confess  that  I  am  strongly  prejudiced  in  favor  of 
hard  money,  chiefly  because  it  accomplishes  instant  liquida- 
tion and  saves  account  keeping.  For  this  reason,  alone,  I 
am  of  opinion  that  for  an  indefinite  time,  civilized  men  will 
use  it  as  an  instrument  of  exchange. 

Very  truly  yours, 

William  W.  Folwell. 

343  By  "hard  money,"  of  course  the  professor  means 
coin.  He  confesses  he  is  "strongly  prejudiced  in  favor  of 
hard  money,  chiefly  because  it  accomplishes  instant  liquida- 
tion and  saves  account  keeping."  Now,  the  facts  are,  that 
while  it  is  true  that  hard  money  accomplishes  instant  liquid- 
ation in  the  individual  cases  in  which  it  is  used,  it  is  also  true 
that  all  business  transactions  cannot  be  thus  liquidated  with 
hard  money,  because  there  is  not  enough  of  it  for  that  pur- 
pose, and,  in  the  very  nature  of  things,  there  never  can  be 
(335);  and  it  is  for  this  reason  that  the  Mutual  Credit  Sys- 
tem was  devised  and  is  offered  as  a  substitute,  because  it  will 
facilitate  the  accomplishment  of  instant  liquidation  in  all  bus- 
hiess  transactions.  It  is  not  true,  therefore,  that,  as  a  sys- 
tem, hard  money  accomplishes  instant  liquidation  and  saves 
account  keeping;  for  it  is  the  hard  money  system  that  com- 


l6S  THE    NEW    PHILOSOPHY    OF    MONEY 

pels  a  resort  to  account  keeping-  and  other  forms  of  unse- 
cured credit,  and  from  which  there  is  no  relief  except  by  the 
adoption  of  the  Mutual  Credit  System. 

344  In  the  light  of  these  facts,  which  have  been  amply 
sustained  in  this  volume,  what  is  the  position  of  Prof.  Fol- 
well?  His  position  is  that  of  one  who  is  ignorant  and  preju- 
diced on  the  subject;  the  subject  being  the  very  one  for 
which  he  holds  a  professorship  and  about  which  he  presumes 
to  instruct  the  youths  who  attend  the  University.  He  is 
called  upon  and  it  is  pointed  out  to  him  that  he  is  teaching 
that  which  is  not  true,  and  is  furnished  with  printed  matter 
that  claims  to  prove  this  position.  He  is  respectfully  invited 
to  express  his  opinion  and  is  afforded  an  opportunity  to  lec- 
ture on  the  subject  but  declines  to  do  so.  He  is  next  included 
in  a  general  challenge  to  meet  the  writer  in  a  public  debate; 
but  there  is  no  response.  Evidently,  the  question  whether 
he  is  teaching  correct  ideas  or  not,  is  of  little  consequence  to 
him.  If  it  is  error,  it  is  at  least  respectable  and  venerable, 
and  he  has  plenty  of  company,  since  the  professors  in  all  the 
colleges  are  teaching  the  same  error. 

345  Let  me  now  call  the  reader's  attention  to  a  few  pop- 
ular fallacies  we  have  not  heretofore  considered.  One  of 
these  fallacies  is  the  popular  notion  that  as  gold  and  also  sil- 
ver coin  is  shipped  abroad  to  settle  balances  due  other  na- 
tions, that  we  actually  settle  such  balances  with  money  just 
as  banks  settle  balances  through  the  clearing-houses  with 
money.  This  notion  is  erroneous.  The  coin  shipped  is 
accepted,  not  as  money,  but  as  commodity.*  It  is  so  much 
gold  or  so  much  silver.  The  stamp  which  government  im- 
presses upon  the  coin  is  useful  in  that  it  is  acceptable  proof 
of  the  degree  of  fineness  or  purity  of  the  metal  it  is  composed 


*  Wm.  P.  St.  John,  president  of  the  Mercantile  Nat.  Bank  of  New 
York,  in  his  testimony  before  the  Committe  on  Currency  and  Bank- 
ing, Said:  "Money  is  all  domestic.  Our  $iogold  piece  is  accounted 
21^8  grains  of  nine-tenths  fine  gold  when  bejond  the  jurisdiction  of 
the  United  States."  [When  of  full  weight,  Mr.  St.  John  should  have 
added.] 


CONCLUSION  169 

of,  but  it  does  not  affect  its  value;  that  is  determined  by 
what  gold  or  silver  is  worth  on  the  market  as  bullion.  We 
do  not,  therefore,  pay  foreign  balances  with  money  at  its 
face  value.  We  may  ship  money,  but  we  must  send  enough 
to  make  up  the  difference  between  the  face  value  and  the 
bullion  value  of  the  coin,  as  the  latter  is  what  counts.-}"  If 
the  clearing-house  in  New  York,  through  which  most  for- 
eign balances  are  paid,  has  coin  of  the  particular  nation  to 
which  a  balance  is  due,  it  can  ship  that  coin,  and  that,  of 
course,  is  accepted  at  its  face  value  because  it  is  the  money  of 
that  nation.  The  same  is  true  when  a  foreign  clearing- 
house has  a  balance  to  pay  the  clearing-house  in  New  York 
and  has  coin  of  this  nation.  It  is,  of  course,  accepted  at  its 
face  value.  Coin,  therefore,  when  it  leaves  the  country  that 
coined  it,  goes  as  commodity,  but  when  it  returns,  it  returns 
as  money. 

346  It  will  be  seen,  then,  that  coin  is  not  essential  to  pay 
foreign  balances,  and  that  the  establishment  of  the  Mutual 
Credit  System  will  not  in  the  least  interfere  with  such  settle- 
ments. Foreign  debt  being  always  paid  in  commodities, 
what  commodity  depends  on  which  it  is  the  most  profitable 
to  ship.  When  the  Mutual  Credit  System  has  effectually 
put  an  end  to  manipulations  of  the  money  market  by  specu- 
lators, these  balances  will  adjust  themselves,  mostly,  perhaps 
entirely,  by  exchange  of  products  for  consumption,  instead  of 
constantly  carting  gold  or  silver  back  and  forth  between  na- 
tions, merely  for  the  purpose  of  settling  balances  due.  Bull- 
ion, and  also  coin,  is  sometimes  shipped  out  one  week  and 
returned  the  next.  Interest  on  a  few  millions,  even  for  a 
few  days,  is  considerable  of  an  item,  and  it  is  to  avoid  pay- 
ment of  interest  that  this  bullion  is  hurried  forward  to  meet 
obligations  when  they  become  due;   but    when  the  Mutual 


■f  With  this  exception,  however,  that  a  balance  due  a  nation  creates 
a  demand  for  its  coin,  because  it  can  be  used  as  money  to  pay  that 
balance,  provided  it  is  full  weight,  and  therefore  enhances  its  value 
above  that  of  bullion. 


l>JO  THE    NEW    PHILOSOPHY    OF    MONEY 

Credit  System  shall  have  annihilated  that  hydra-headed  mon- 
ster begotten  of  stupidity  and  law,  there  will  be  greater  lati- 
tude in  the  settlement  of  balances,  admitting  of  their  liquida- 
tion by  the  shipment  of  other  commodities,  the  freight  and 
insurance  on  which  will  not  be  a  useless  expense. 

347  Another  popular  fallacy  is  the  prevailing  notion  that 
the  existence  of  the  wildcat  banks  of  ante  bellum  times  was 
due  to  lack  of  government  control  of  banking;  and  the  fact 
that  they  disappeared  after  the  federal  government  assumed 
control  is  pointed  to  as  proof  that  the  notion  is  correct.  Not 
long  ago  a  southern  daily  paper,  discussing  the  subject,  made 
the  following  statement: 

348  "The  wildcat  bank  is  an  institution  which  springs  up 
in  the  absence  of  good  currency,  and  under  such  conditions, 
if  the  wildcat  did  not  come,  there  would  be  an  equivalent  in 
unsecured  book  credits.  Liberty  to  organize  for  the  issue  of 
sound  currency  is  the  extinguisher  to  be  placed  upon  all 
schemes  for  issuing  wildcat  paper." 

349  This  is  the  correct  idea.  If  the  people  had  thor- 
oughly understood  the  money  question,  they  would  have 
organized  to  supply  themselves  with  a  medium  of  exchange 
that  was  reliable,  and  refused  to  take  that  which  was  doubt- 
ful, for  no  one  was  compelled  to  take  the  "money"  of  the 
wildcat  banks.  Such  a  course  would  have  effectually  exter- 
minated them.  But  money  was  scarce  then  as  it  is  now,  and 
the  ignorance  of  the  people  afforded  an  opportunity  for  un- 
principled speculators  to  float  their  worthless  bills.  If  there 
had  been  plenty  of  money  as  easily  obtainable  as  it  will  be 
under  the  Mutual  Credit  System,  it  would  have  been  impossi- 
ble for  "wildcat"  or  "red-dog"  "money"  to  have  got  into 
circulation. 

350  But  other  speculators,  just  as  unprincipled,  devised  a 
scheme  to  get  rid  of  the  wildcat  by  forning  a  money  trust, 
with  government  to  enforce  its  demands.  Thus  the  central- 
ization of  the  money  power  under  the  protection  of  the  gen- 
eral government  was  consummated.     Then  the  promoters  of 


CONCLUSION  171 

this  scheme  went  about  boasting  that  they  had  rid  the 
country  of  wildcats,  and  established  the  "best  money  system 
the  world  has  ever  seen."  It  was  not  to  increase  the  volume 
of  money  that  they  did  this,  but  to  cut  off  the  competition 
that  such  banks  made  the  "regular"  bankers.  It  would  be 
interesting  to  know  whetiier  the  people  have  not  lost  more 
by  the  failures  of  national  banks  than  they  ever  did  by  the 
wildcats.  For  the  four  years  preceding  1S90,  the  loss  to 
depositors  by  failures  of  national  banks  exceeded  a  million 
dollars  a  year.  Recent  inquiry  at  the  comptroller's  depart- 
ment failed  to  ascertain  what  the  loss  has  been  since  then.* 

351  Necessity,  not  government,  is  the  mother  of  inven- 
tion. Ingenuity  is  the  originator  of  remedies  or  means  of 
overcoming  difficulties.  The  quickest  and  surest  way,  then, 
to  have  evils  removed,  is  to  encourage  ingenuity  to  invent 
means  of  overcoming  them.  This  is  the  course  that  should 
be  pursued  instead  of  allowing  government  to  interfere.  It 
involves  no  compulsory  contributions  for  experiment.  Those 
who  wish  to  experiment,  do  so  at  their  own  expense.  Gov- 
ernment being  in  reality  but  the  watch-dog  and  tool  of  the 
class  that  has  succeeded  in  getting   control,  instead  of  invent- 


*  Mr.  Geo.  A.  Butler,  president  of  the  National  Tradesmen's  Bank 
of  New  Haven,  Connecticut,  testified  before  the  Congressional  Com- 
mittee on  Banking  and  Currency,  December  12,  1894,  as  follows: 

As  to  the  guarantee  fund,  I  made  some  figures  embracing  twenty- 
nine  yeais  of  the  national  banking  system.  Take  all  the  national 
banks  that  have  failed  within  that  twenty-nine  years  and  if  you  had 
not  only  made  the  notes  payable  out  of  this  guarantee  fund,  but  the 
deposits  also,  that  fund  would  have  paid  every  dollar  lost  by  depos- 
itors as  well  as  every  dollar  of  notes,  and  there  would  have  been 
more  than  two  and  a  half  times  the  amount  left  in  the  treasury.  In 
other  words,  in  the  twenty-nine  years  the  banks  have  paid  in  to  the 
government  seventy-nine  millions  as  a  tax  on  their  circulation,  and 
if  that  had  been  applied  to  paying  the  depositors  in  failed  banks  as 
well  as  the  notes  of  failed  banks,  it  would  have  paid  every  dollar  of  it 
and  still  left  fifty-two  millions  in  the  treasury." 

Since  this  tax  was  collected  to  cover  expenses  of  supervision  and 
thus  protect  (?) ///^ /po/Ze  against  wildcat  banking,  and  since  it  did 
not  make  good  the  losses  to  depositors  of  failed  national  banks,  but 
held  onto  the  plunder, — the  excess  over  cost  of  "supervision" — the 
government  must  be  regarded  as  fartkeps  criminis  with  those  who 
robbed  the  depositors. 


172  THE    NEW    PHILOSOPHY    OF    MONEY 

ing  a  remedy  for  an  evil,  it  devises  a  scheme  in  the  interest  of 
that  class,  labels  it  a  "remedy"  and  foists  it  upon  the  people, 
w^ho,  supposing  government  to  be  the  paternalistic  institution 
they  have  been  led  to  believe,  neglect  to  analyze  its  true  char- 
acter. After  time  has  proved  the  "remedy"  does  not  give 
the  results  anticipated,  they  conclude  it  is  because  the  wrong 
men  are  in  office  and  that  others  must  be  put  in  their  place; 
but  the  change,  instead  of  affording  relief  only  intensifies  the 
evils.  A  new  combination  of  speculators  and  politicians  is 
formed.  "Now  we  have  the  pop-sure  thing!"  It  looks 
plausible  on  its  face,  because  of  the  peculiarly  illogical  way 
people  have  of  reasoning,— the  result  of  a  false  education 
which  suppresses  manhood  and  independence  and  cultivates 
obedience  and  respect  for  authority,  instead  of  for  that  which 
is  right.  In  the  meantime,  the  inventor,  the  genius  who 
could  afford  relief  by  organizing  associations  to  put  in  opera- 
tion practical  remedies,  is  handicapped  by  the  restrictions  the 
class  in  control  have  instituted  in  the  name  of  "law  and  or- 
der," "good  government"  and  the  like,  when,  in  reality,  it  is 
done  to  prevent  the  people  from  freeing  themselves  from  the 
slavery  they  are  in. 

352  If  the  people  possessed  sufficient  manhood  and  inde- 
pendence, the  functions  of  government  would  constantly  be 
reduced,  and  the  evils  we  are  contending  with  would  be 
overcome  in  the  same  proportion.  Freedom  to  devise  ways 
and  means  to  improve  our  condition  is  what  we  need,  and  it 
can  only  come  in  proportion  as  politicians  cease  to  rule. 

353  Among  the  fallacies,  or  at  least  mistaken  notions  of 
reform,  is  that  of  regarding  the  land  question  as  paramount 
to  the  money  question.  This  view  is  not  confined  to  the 
Single  Taxers.  It  is  held  also  by  others  who  are  not,  but 
who  would  abolish  all  titles  to  land  except  for  actual  use. 
Prominent  among  the  latter  is  Mr.  J,  K.  Ingalls,  who  has 
written  very  ably  on  free  land.  Of  so  little  importance  does 
this  writer  regard  the  money  question,  that  in  his  pamphlet. 


CONCLUSION  173 

"Work  and  Wealth,"  treating  of  industrial  emancipation,  the 
following  is  all  he  has  to  say  about  it; 

354  "I  may,  in  this  connection,  refer  to  the  instrumental- 
ity of  money  or  currency,  servicahle  in  moving  crops  and  the 
work  of  distributing  generally.  Its  importance,  however,  is 
mainly  due  to  the  want  of  mutualism  in  our  distributive  sys- 
tem and  of  equity  in  our  methods  of  exchange. 

355  "A  charge  for  the  time  use  of  this  instrument,  in 
defiance  of  all  the  moralists  from  Moses  and  Cato  to  Ruskin 
and  Palmer,  has  been  enforced  by  our  laws,  because  labor 
was  at  the  mercy  of  the  few  who  hold  the  soil,  and  because 
operations  could  be  made  to  pay  dividends  out  of  the  wealth 
purchased  by  the  labor  of  the  poor  and  simple." 

356  The  Mutual  Credit  System  is  the  very  essence  of 
mutualism  in  distribution,  and  its  realization  is  the  only  pos- 
sible way  of  introducing  equity  into  our  methods  of  exchange. 
It  is  not  the  importance  of  money,  therefore,  that  is  "mainly 
due  to  the  want  of  mutualism  in  our  distributive  system,"  but 
the  unnatural,  artificial  power  that  money  now  possesses  (359), 
for  the  certificates  of  credit  or  money  of  the  Mutual  Credit 
Associations,  will  be  the  most  important  factor  in  our  distrib- 
utive system.  If  Mr.  Ingalls  knows  of  a  plan  by  which 
mutualism  and  equity  can  be  introduced  into  our  methods  of 
exchange,  and  in  which  money  will  become  an  unimportant 
factor,  he  should  give  it  to  the  public.  It  is  true,  as  he  says, 
interest  "has  been  enforced  by  our  laws";  but  when  he  says, 
''because  labor  was  at  the  mercy  of  those  who  hold  the  soil," 
he  has  ventured  into  deep  water  without  knowing  how  to 
swim.  Did  the  fact  that  labor  was  at  the  mercy  of  those 
who  hold  the  soil  enable  the  money-lenders  to  enforce  inter- 
est by  lav^?  Suppose  the  land  question  settled,  and  anyone 
can  occupy  or  utilize  vacant  land  without  having  to  buy  or 
pay  rent,  would  they  not  enforce  interest  by  law  just  the 
same  as  they  do  now  if  the  money  system  remains  unchanged? 
Will  free  land  abolish  interest  on  capital  invested  otherwise 
than  in  land?  Will  it  put  an  end  to  interest  on  national, 
county,  state  and  municipal  debts?     Will  the  money-lender 


1 74  THE    NEW    PHILOSOPHY    OF    MONEY 

loan  his  money  at  a  less  rate  of  interest  because  monopoly  of 
land  has  come  to  an  end?  Mr.  Ingalls  and  those  of  his 
school  seem  to  think  that  when  the  abolition  of  land  monop- 
oly is  attained,  very  little  money  will  be  needed;  it  will  be- 
come a  drug  in  the  market  and  thus  interest  will  disappear. 
This  reasoning  is  utterly  absurd.  What  will  induce  people 
to  abandon  the  use  of  money?  Nothing  but  a  system  of 
exchange  that  will  dispense  with  the  use  of  money.  But 
such  a  system  would  have  to  be  superior  in  every  way  and 
more  economical  than  any  that  has  been  or  could  be  devised 
that  used  money;  and  until  land  reformers  and  Single  Tax- 
ers,  who  belittle  the  importance  of  money,  can  show  us  such 
a  system,  it  would  be  an  advantage  to  the  cause  they  are  in- 
terested in  if  they  would  reconsider  their  philosophy  on  the 
subject.  They  should  give  good  reasons  for  their  position  or 
abandon  it. 

357  The  money  question  and  the  land  question  are  sepa- 
rate and  distinct  questions.  Either  can  be  settled  without  the 
other,  although  the  settlement  of  one  would  greatly  facilitate 
the  settlement  of  the  other,  because  the  struggle  to  get  rid  of 
the  one  would  naturally  open  the  eyes  and  the  understanding 
of  the  people  to  the  evils  of,  and  the  proper  remedy  for,  the 
other.  If  the  solution  and  settlement  of  either  will  contrib- 
ute to  the  solution  and  settlement  of  the  other,  the  question 
to  consider  first,  is,  which  of  the  two  is  the  easiest  of  accom- 
plishment? To  this,  most,  if  not  all  philosophical  Anarchists 
will  answer, — "the  money  question,"  and  these  are  their  rea- 
sons: The  settlement  of  the  land  question  requires  legisla- 
tion, or  revolution  dispossessing  the  landlords  by  force.  The 
former  is  out  of  the  question  at  present.  Civil  war  is  immi- 
nent, and  may  happen  in  the  near  future;  but  it  is  very 
undesirable  and  should  be  avoided  if  possible.  On  the  other 
hand,  the  settlement  of  the  money  question,  as  "The  New 
Philosophy  of  Money"  has  demonstrated,  is  a  question  of 
organizing  a  few  associations  upon  an  equitable  and  practic- 
able basis.     The  extension  of  these  associations  to  every  city 


CONCLUSION  175 

in  the  United  States  (and,  in  fact,  to  all  the  cities  of  the 
world),  which  we  predict  will  be  very  rapid,  will  settle  the 
money  question  without  legislation  or  civil  war.  We  claim, 
therefore,  that  the  money  question  is  the  easiest  to  settle,  and 
if  the  forces  of  all  whose  ultimate  aim  is  the  same,  namely, 
justice  and  hence  the  abolition  of  poverty,  were  to  unite  on 
this  one  reform, — the  establishment  of  a  rational  money  sys- 
tem— we  could  utterly  destroy  the  money  power  in  less  than 
a  year.  Since  it  is  this  money  power — this  monopoly  of 
money, — that  has  corrupted  legislation,  and  always  will  as 
long  as  it  lasts,  it  is  indispensable  to  destroy  it  first,  that  it 
may  not  checkmate,  as  it  ahvays  has  and  always  will,  any 
measure  that  tends  to  weaken  its  influence.  Its  utter  de- 
stfuction,  therefore,  cost  what  it  may,  is  the  only  hope  for 
humaiiity.  It  is  needless  to  go  any  further  into  details  to 
prove  the  paramount  importance  of  money  reform  over 
land  reform.  The  influence  of  the  money  power  will  not  be 
denied.  If  for  no  other  reason  than  the  removal  of  this 
potential  opponent  of  land  reform,  money  reform  and  prog- 
ress generally,  all  reformers  should  unite  in  common  cause 
against  the  common  enemy. 

358  I  cannot  refrain  from  again  calling  attention,  before 
closing  this  chapter,  to  what  impresses  me  more  and  more  as 
being  the  correct  view  in  regard  to  the  exchangeability  of 
paper  money  under  a  true  and  equitable  system  of  exchange. 
It  is  that  secured  credit  in  the  form  of  certificates  of  credit, 
furnished  in  accordance  with  the  Mutual  Credit  System,  not 
being  a  commodity  nor  redeemable  in  a  definite  quantity  of 
any  commodity,  is  not  affected  by  change  in  the  value  of  any 
commodity,  nor  even  by  supply  and  demand  as  commodities 
are.  Unlike  what  takes  place  under  the  "standard"  money 
system,  changes  in  market  values  or  prices  will  not  be  influ- 
enced by  any  "money  market."  The  medium  of  exchange 
will  have  no  more  effect  on  values  than  a  pencil  with  which 
one  works  out  a  sum  in  arithmetic  affects  the  result;  it 
simply  enables  one  to  do  the  sum.     In  like  manner  the  cer- 


176  THE    NEW    PHILOSOPHY    OF    MONEY 

tificates  of  credit  facilitate  transactions,  but  do  not  affect 
them.  Pencils  do  not  affect  business  transactions  any  more 
than  the  color  of  one's  hat  or  necktie;  neither  will  the  certi- 
ficates of  credit  of  the  Mutual  Credit  System.  There  never 
can  be  a  scarcity  of  secured  credit  any  more  than  a  scarcity 
of  pencils.  An  individual  may  be  minus  a  pencil,  but  that  is 
not  a  scarcity  of  pencils.  There  would  be  a  scarcity  of  pen- 
cils if  the  individual  had  money  to  exchange  for  one  but 
could  find  no  one  who  had  any  to  exchange.  So  likewise, 
secured  credit  would  be  scarce  if  an  individual  having  secur- 
ity could  not  get  the  certificates  of  credit;  but  as  long  as  the 
Mutual  Credit  Associations  furnish  them  to  all  who  can  put 
up  security,  he  can  get  them  and  there  is  no  scarcity  of 
secured  credit.  If  the  foregoing  is  correct  reasoning,  then 
the  certificates  of  credit  will  have  no  power  whatever  to  in- 
fluence values  any  more  than  a  pencil  or  the  color  of  one's 
necktie  or  hat  has  now. 

359  Today  money  has  a  power,  not  that  of  facilitating 
exchanges,  but  another  superadded  thereto  (105)  and  which 
comes  from  restriction,  the  legal  tender  enactment  and  the 
fact  that  it  is  a  commodity  and  therefore  affected  by  supply 
and  demand.  The  term  "purchasing  power"  expresses  now, 
not  the  exchangeability  of  money  merely,  but  it  includes  this 
vestige  of  authority.  As  commerce  is  conducted  now,  to 
buy  and  sell  is  to  be  engaged  in  a  scheme  to  plunder.  Labor 
sells  itself  and  money  buys  it.  Politicians  sell  themselves, 
and  toilers  sell  their  votes.  The  tender  and  loving  touch  of 
woman  (or  what  otherwise  would  be  the  magnetic  and  lov- 
ing touch  of  woman)  is  bought  and  sold.  All  this  unholy 
commerce  will  cease  under  the  new  system.  The  medium 
of  exchange — secured  credit  in  the  form  of  certificates — will 
have  no  "purchasing  power";  and  we  shall  not  "buy"  and 
"sell,"  but  exchange^  the  certificates  of  credit  being  the  med- 
ium to  facilitate  the  transfer,  as  the  pencil  is  in  doing  the 
sum.  The  terms  buy  and  sell,  expressing  as  they  do  trans- 
actions   which   are    so    often    of    a   questionable   character, 


CONCLUSION  177 

involving  the  surrender,  not  only  of  right,  but  of  manhood 
and  womanhood,  can  hardly  be  terms  appropriate  to  convey 
an  idea  of  exchange  as  it  will  be  under  the  new  system. 
And  the  term  "purchasing  power."  What  does  itsignif}'? 
It  is  a  synonym  of  "Almighty  Dollar";  fit  contemporaries  of 
this  age  of  slavery  and  authority.  In  connection  with  the 
medium  of  exchange  provided  by  the  Mutual  Credit  System, 
the  term  will  be  inapplicable.  We  may  continue  to  use  the 
terms  buy  and  sell,  but  their  significance  will  be  changed. 

360  In  view  of  existing  monetary  and  industrial  condi- 
tions, and  what  has  been  presented  in  this  volume,  what  is 
the  need  of  the  hour?  There  are  those  who  think,  or  at 
least  afiirm  that  they  believe,  that  the  present  inexpressably 
bad  industrial  and  commercial  conditions  will  gradually 
change  and  we  shall  again  see  what  is  called  "good  times"; 
but  they  do  not  take^  into  consideration  the  process  that  is 
going  on  during  these  alternate  changes, — the  centralization 
of  wealth  in  the  hands  of  a  few,  and  the  pauperization  of  the 
masses.  They  fail  to  see  that  the  production  of  wealth  can- 
not keep  pace  with  its  absorption  through  compound  interest 
( 1 17-126).  It  is  folly  to  talk  about  personal  effort,  energy 
and  thrift.  Everyone  knows  who  cares  to,  that  these  quali- 
ties avail  nothing  of  themselves.  To  succeed  in  surrounding 
one's  self  with  comforts  it  is  necessary  to  be  an  exploiter  of 
men  and  women;  to  be  oblivious  to  their  sufferings;  to  dis- 
regard all  appeals  to  manhood  and  crush  out  that  sublime 
characteristic  of  the  most  noble  of  our  race ;  to  stultify  one's 
self — turn  a  deaf  ear  to  the  higher  criticism  — and  follow 
only  that  debased  and  sordid  ambition, — the  accumulation  of 
a  greater  pile  of  wealth  than  others  have  been  able  to  con- 
centrate. So  that  to  be  a  success,  one  must  cultivate  the 
opposite  of  all  moral  teachings.  And  it  is  easily  to  be  seen 
that  it  is  to  the  sufferings  that  many  have  endured  rather 
than  become  such,  that  we  owe  what  little  advancement  and 
refinement  we  enjoy,  else  the  strife  over  mine  and  thine 
12 


I7*J  THE    NEW    PHILOSOPHY    OF    MONEY 

would  have  become  so  fierce,  that  our  civilization  would  be  a 
still  worse  cannibalism  than  it  is. 

361  And  to  what  end  shall  we  endure  all  this  discomfort 
and  witness  this  misery?  There  is  no  rational  desire  that 
may  not  be  fulfilled,  nor  luxury  that  may  not  be  enjoyed  by 
any  one  who  is  industrious  under  a  rational  system  of  society, 
the  initiation  of  which  must  be  preceded  by  a  rational  system 
of  exchange.  To  this  end,  then,  I  proclaim  the  great  need 
of  the  hour  to  be  a  perfect  money  system.  We  are  losmg 
time,  and  unless  we  establish  such  a  system  our  children  will 
execrate  our  memory — the  next  generation  will  brand  us  as 
liars  and  idiots;  liars  because  we  did  not  practice  what  we 
preached,  and  idiots  because  we  deliberately  defeated  pros- 
perity, and  burdened  it  with  debt. 

362  Let  us  then  briefly  review  The  New  Philosophy  of 
Money.  In  what  does  it  differ  from  the  macaronic  paral- 
ogism called  "finance,"  or  the  present  money  muddle? 

363  The  former  is  the  recognition  and  synthetic  arrange- 
ment of  all  the  factors  that  enter  into  the  subject  of  the  sup- 
ply of  money.  By  the  proper  consideration  of  these,  princi- 
ples have  been  discovered,  and  a  true  philosophy  has  been 
formulated. 

364  The  latter  is  the  result  of  an  unintelligent  effort  to 
attain  certain  ends.  Principles  have  been  disregarded,  and 
false  premises  have  led  to  erroneous  conclusions. 

365  In  the  one,  the  end  Bought  is  progress, — greater 
facilities  in  order  to  have  better  results  with  an  expenditure 
of  less  labor.  In  the  other,  it  is  a  reckless  perpetuation  of  a 
system,  regardless  of  consequences. 

366  The  Mutual  Credit  System  is  a  plan  to  supply  the 
paper  medium  of  exchange,  and  has  been  formulated  in 
accordance  with  the  New  Philosophy  of  Money.  All  the 
elements  or  factors  pertaining  thereto  are  recognized  and 
duly  considered.     No  rights  are  invaded,  none  are  ignored. 

367  The  invention  of  paper  money  made  possible  the 
abolition  of  book  credits  by  substituting  it;  thus  making  all 


COXCLUSION  179 

exchanges  cash  transactions.  But  such  a  revolution  was  not 
in  the  interest  of  money-lenders,  as  such;  and  although  bor- 
rowers and  business  people  interested  in  the  change,  consti- 
tute an  overwhelming  majority,  they  have  never  been  wise 
enough  to  inaugurate  it. 

36S  Coin,  a  definite  quantity  of  commodity,  being  the 
circulating  medium  previous  to  the  invention  of  paper  money, 
suggested  the  idea  of  a  measure  of  value,  which  gained 
almost  universal  acceptance,  and  has  served  as  a  pretext  for 
limiting,  through  legislation,  the  volume  of  paper  money 
proportional  to  the  amount  of  the  coin;  thus  money-lenders 
have  reaped  the  advantages  of  this  great  invention  for  them- 
selves alone;*  the  rights  of  borrowers  and  the  interests  of 
the  public  have  been  disregarded,  and  we  have  realized  but 
a  fragment  of  the  progress  we  should  have  made  had  the 
volume  of  paper  money  been  commensurate  with  the  need 
for  a  medium  of  exchange. 

369  Thus  we  see  that  the  present  system  is  not  based  on 
principles;  that  the  elements  or  factors  that  pertain  to  the 
subject  have  never  been  recognized  nor  considered;  and  that, 
therefore,  the  prevailing  theory  of  money  is  not  a  true  phi- 
losophy, but  is  based  on  popular  fallacy  and  maintained  in 
the  interest  of  a  class. 

370  The  great  mistake  that  has  side  tracked  thought  on 
this  subject  has  been  the  notion  that  money-lenders  are  an 
essential  factor;  that  we  could  not  do  without  them,  and  that, 
in  order  to  keep  them  within  bounds  of  safety,  we  must  have 
government  control.  The  founder  of  this  new  philosophy, 
keeping  right  along  on  the  main  track,  discovered  the  error 


*The  paper  money  of  the  present  system  is  capital  (3o-34)-  That 
of  the  Mutual  Credit  System  is  credit  (32,  30-34).  In  the  former 
it  is  the  credit  of  the  money-lender  (3o)  when  it  is  his  uncovered 
notes  or  bank  bills  in  excess  of  its  specie,  it  is  true,  but  it  always  be- 
comes capital  to  the  borrower  and  the  public  generally.  Under  the 
latter,  as  just  stated,  it  will  be  credit  to  the  borrower  and  the  public 
generally  (80),  because  issued  to  the  borrower  direct  from  the  print- 
ing press,  and  therefore  neither  the  capital  nor  the  credit  of  anyone 
else. 


tSo  THE    NEW    PHILOSOPHY    OF    MONEY 

(95*95'^'95'^)'  ^^^  pointed  out  that  co-opevation,  or  the  appH- 
cation  of  the  mutual  feature  in  the  supply  of  money,  abol- 
ishes both. 

371  With  regard  to  the  volume  of  money  under  the  one 
and  the  other  systems,  it  does  not  take  a  very  great  effort  of 
the  intellect  to  realize  that  if  all  money  loaned  was  new  bills 
which  came  to  the  borrower  direct  from  the  printing  press, 
notwithstanding  that  all  of  them,  in  their  turn,  would  be  re- 
turned to  the  institutions  that  furnished  them,  as  the  time  for 
which  they  were  loaned  expired,  the  amount  in  circulation 
would  largely  exceed  the  demands  of  the  most  radical  per 
capita  Populist.  Vet  such  will  be  the  case  under  the  Mutual 
Credit  System.  I  will  anticipate  the  exclamation  on  the 
part  of  the  "great"  financiers,  political  economists  and  money- 
lenders, who  will  pronounce  this  "too  much  money."  It  will 
be  nothing  of  the  kind,  as  I  shall  proceed  to  demonstrate. 
"Like  causes  produce  like  effects,"  but  different  causes  gen- 
erally produce  different  effects.  The  cause  that  produces 
depreciation  of  the  paper  money  of  the  specie  basis  or  the 
present  system  will  be  entirely  absent  under  the  Mutual 
Credit  System ;  for  that  cause  is  the  superabundance  of  paper 
issued  relative  to  the  basis  on  which  it  rests,  or  overissue,  and 
hence  impossibility  of  redemption;  and  no  such  condition 
can  result  under  the  Mutual  Credit  System,  for  the  base  is 
always  much  larger  than  the  issue,  whatever  the  issue  may 
be,  while  the  redemption  of  its  paper  money  is  effected  in 
the  ordinary  transactions  of  trade.  The  individual  who  has 
issued  some  certificates  of  credit  furnished  him  by  the  Mut- 
ual Credit  Association,  is  notified  by  the  association  a  few 
days  ahead,  that  the  note  which  he  gave  in  exchange  for  the 
certificates  will  be  due  on  a  certain  day.  If  he  does  not  care 
to  renew  his  note,  or  the  security  is  such  that  the  association 
will  not  extend  the  time  for  payment,  he  takes  certificates 
which  he  has  on  hand  or  obtains  by  disposing  of  something 
he  has  for  sale,  proceeds  to  the  ofiice  of  the  association  and 
pays  his  note.     The  act  of  taking  the  certificates  in  exchange 


COXCLUSIOX  Ibl 

for  whatever  he  sold,  is  the  act  of  redemption.  The  return 
of  them  to  the  association,  is  the  act  of  retiring  them  from 
circulation.  The  borrower  must  redeem  a  sum  of  money 
of  the  Mutual  Credit  Association  equal  to  the  amount  it  fur- 
nished him,  and  retired  it  from  circulation.  He  must  do  it 
voluntarily,  or  the  association  will  do  it  by  disposing  of  his 
property. 

372  The  reader  will  see,  then,  that  the  Mutual  Credit 
System  provides  a  volume  of  money  limited  only  by  the 
security — any  product  of  labor  that  has  a  market  value. 
That  it  provides  a  most  practicable  and  unfailing  method  of 
redemption  of  the  money,  and  for  its  retirement  from  circu- 
lation. 

373  The  present  system  provides  a  volume  of  paper 
money  equal  to  the  quantity  of  gold  there  may  be,  or  as 
much  more  as  money-lenders  and  politicians  are  willing  to 
take  chances  of  being  caught  unable  to  redeem  in  gold.  In 
order  then,  to  have  good  money,  it  will  necessarily  have  to 
be  very  scarce,  and  if  we  have  plenty  it  will  necessarily  be 
very  poor.* 

374  The  volume  of  certificates  of  credit  in  circulation 
will  be  very  large  compared  with  that  of  any  coin  basis  sys- 
tem at  any  time.  The  low  rate  of  interest  at  which  it  can 
be  had,  as  I  have  shown  (316,317),  will  induce  people  to  use 
it  and  abandon  all  forms  of  unsecured  credit.  It  will  cost 
much  less  and  be  much  more  convenient  and  satisfactory,  to 
have  the  ledger  accounts  balanced  and  the  balances  in  this 
paper  money  in  the  safe  or  on  deposit,  than  to  carry  them  on 
the  ledger  as  we  do  now  (93-94,  308-309,  312). 

375  A  "great  abundance"  of  paper  money  of  the  kind 
that  is  "redeemable  in  specie,"  causes  fear  of  depreciation, 
manifesting  itself  in  a  preference  for  things  of  value.     In- 


*  How  strange  is  political  economy!  This  delectable  "science" 
purports  to  deal  with,  and  present  the  correct  philosophy  of  produc- 
tion and  exchange ;  yet  its  theory  of  money  is,  that  if  we  had  enough 
of  it,  there  would  be  too  much! 


l82  THE    NEW    PHILOSOPHY    OF    MONEY 

creasing  demand  causes  a  rise  in  prices,  which,  in  the  case  of 
specie,  one  of  the  things  of  vakie,  takes  the  form  of  a  pre- 
mium, for  those  who  have  the  things  of  value  are  actuated  by 
the  same  lack  of  confidence.  A  "great  abundance"  of  money, 
then,  under  such  a  system,  means  that  one  must  pay  that 
much  more  for  the  goods  he  buys,  if  it  does  not  ultimately 
result  in  total  loss. 

376  We  may  now  sum  up  the  advantages  of  the  Mutual 
Credit  System  as  follows:  That  its  paper  money,  which  is 
secured  credit,  will  take  the  place  of  zinsectired  credit,  and 
instead  of  book  accounts,  all  transactions  will  be  cash,  be- 
cause credit  in  that  form  (paper  money  issued  on  good  secur- 
ity) costs  but  a  fraction  of  what  it  costs  in  any  other  form, 
while  its  advantages  are  incomparably  greater. 

377  That  it  will  be  uniform  throughout  the  whole 
country,  because  all  the  associations  that  issue  it  will  be  un- 
der the  supervision  of  one  general  clearing-house,  and  hence: 

378  That  it  cannot  depreciate  in  exchangeable  value. 

379  That  it  will  put  an  end  to  money  panics,  as  it  can 
never  be  scarce,  because  it  will  be  issued  on  any  product  of 
labor  that  has  a  market  value.  That  it  will  inaugurate  a 
true  civilization,  with  prosperity  exceeding  anything  ever 
witnessed,  and  will,  therefore,  abolish  poverty. 

3S0  That  it  will  exterminate,  not  only  usury,  but  also 
interest  in  excess  of  cost. 

381  That  under  this  system  monopoly  can  have  no 
existence. 

382  Its  inauguration,  then,  is  the  one  step  that  is  needed 
to  free  us  from  the  grasp  of  the  usurer,  the  corruption  of 
politics,  the  tyranny  of  superstition  and  creeds,  the  degrada- 
tion of  womanhood  and  manhood,  and  from  all  the  manifold 
evils  that  result  from  poverty.  In  a  word:  It  opens  up  to 
view  the  true  destiny  of  man,  foreshadowing  the  realization 
of  what  have  been  but  dreams. 


i83 


NOTE. 

At  the  close  of  my  labors  on  the  manuscript  of  this  work, 
I  received  from  its  author,  Mr.  Arthur  Kitson,  a  copy  of 
"A  Scientific  Solution  of  the  Money  Question.  I  am  sorry 
it  did  not  appear  earlier  as  I  should  have  been  glad  of  an 
opportunity  to  quote  from  it.  I  wish,  however,  to  express 
the  great  pleasure  and  profit  I  have  derived  from  reading  it. 
I  consider  it  by  far  the  ablest  and  most  comprehensive  trea- 
tise on  the  money  question  that  I  know  of.  Mr.  Kitson  is  a 
deep  thinker  and  a  forcible  writer,  demonstrating  his  com- 
plete mastery  of  the  subject  and  his  familiarity  with  its  liter- 
ature. 

Like  myself,  Mr.  Kitson  exposes  "the  great  commercial 
fiction  of  the  nineteenth  century," — the  "measure  of  value," 
and  champions  the  entire  dissociation  of  government  from 
the  regulation  or  supply  of  money.  With  such  a  co-worker 
in  the  cause  of  liberty,  one  necessarily  feels  reassured,  and  a 
renewed  hope  of  a  speedy  triumph. 


APPENDIX. 

It  is  proposed  immediately  to  continue  the  work  of  in- 
augurating tlie  Mutual  Credit  System  suspended  during  the 
preparation  of  this  volume,  which  was  deemed  indispensable, 
in  order  that  the  methods  as  well  as  the  purpose  of  the  sys- 
tem should  be  correctly  and  perfectly  understood.  Now 
that  this  is  complete  and  given  to  the  public,  the  work  of 
procuring  and  enrolling  membership  will  go  on  uninterrupt- 
edly until  there  are  a  sufficient  number  to  organize  the  first 
association;  the  plan  for  w^hich  is  as  follows: 

We,  the  undersigned,  for  the  purpose  of  forming  a  Mutual 
Credit  Association,  under  and  by  virtue  of  the  provisions  of  title  two 
(2)  of  chapter  thirty-four  (34)  of  the  "General  Statutes,  1S7S,"  of  the 
State  of  Minnesota,  in  such  case  made  and  provided,  and  the  laws 
amendatory  thereof  and  supplementary  thereto,  do  hereby  associate 
ourselves  together  and  adopt  the  following  articles  of  incorporation: 

Article  I. 
The  name  of  this  corporation  shall  be  the  Minneapolis  Mutual 
Credit  Association.  The  special  and  only  business  of  this  corpora- 
tion shall  be  to  furnish  certificates  of  credit  as  provided  in  the  articles 
of  incorporation  and  by-laws.  The  principal  place  of  business  of  this 
corporation  shall  be  located  in  Minneapolis,  Minnesota. 

Art.  II. 
The  amount  of  the  capital  stock  of  this  corporation  shall  be  fifty 
thousand  dollars  ($50,000),  divided  into  five  thousand  shares  of  the 
par  value  of  ten  dollars  each.  The  said  stock,  after  the  issue  of  the 
first  five  hundred  shares,  shall  be  sold,  issued  and  paid  in  at  such 
times  as  the  board  of  directors  may  from  time  to  time  determine. 
The  stock  shall  bear  no  interest  nor  be  entitled  to  dividends. 

Art.  III. 

This  corporation  shall  commence  on  the day  of 

189 — ,  and  shall  continue  for  a  period  of  thirty  years. 

Art.  IV. 
The  highest  amount  of  indebtedness  that  this   corporation  may 
contract  shall  be dollars. 

Art.  V. 
The  management  of  the  affairs  of  this  corporation  shall  be  vested 
in  a  board  of  seven  directors,  a  board  of  three  appraisers,  a  manager, 


APPENDIX  185 

a  cashier,  a  secretary,  and  a  counsel  at  law.  The  manager,  cashier, 
secretary  and  counsel  shall  be  appointed  by  the  board  of  directors, 
who  shall  require  each  to  give  bonds  in  sufficient  amount  to  guaran- 
tee the  faithful  performance  of  their  duties. 

Art.  VI. 

As  soon  as  five  hundred  shares  of  the  capital  stock  shall  have 
been  subscribed  for,  or  as  soon  thereafter  as  possible,  the  subscribers 
shall  hold  a  meeting  and  elect  the  boards  of  directors  and  appraisers. 
Each  subscriber  shall  be  entitled  to  one  vote  for  each  share  of  stock, 
and  as  soon  as  this  corporation  enters  upon  its  business  of  furnishing 
certificates,  each  borrower  of  such  certificates  thereby  becomes  a 
member  whether  a  stockholder  or  not,  and  is  entitled  to  one  vote, 
and  one  additional  vote  for  each  $i,ooo  borrowed  in  excess  of  the 
first  $1,000. 

Art.  VII. 

As  soon  as  the  association  is  prepared  to  furnish  certificates  of 
credit,  the  stockholders  shall  be  served  first  and  in  the  order  they 
appear  on  the  subscription  list.  After  all  stockholders  who  wish  to 
borrow,  are  served,  anyone  may  obtain  certificates  of  credit  in 
accordance  with  these  articles  and  the  by-laws. 


BY-LAWS    OF    THE    MINNEAPOLIS    MUTUAL    CREDIT    ASSOCIATION. 

1  In  conformity  with  the  articles  of  incorporation,  as  soon  as 
five  hundred  shares  of  the  capital  stock  shall  have  been  subscribed 
for,  or  as  soon  thereafter  as  possible,  the  stockholders  shall  hold  a 
meeting  and  elect  a  board  of  seven  directors  and  a  board  of  three 
appraisers. 

2  The  board  of  directors  shall  appoint  a  manager,  a  cashier  and 
a  secretary,  and  shall  require  each  to  give  bonds  to  the  board's  satis- 
faction, as  a  guarantee  for  the  faithful  performance  of  their  duties. 

3  The  manager,  cashier  and  secretary  shall  hold  office  until 
they  resign,  or  are  removed  by  the  board  of  directors.  They  shall 
be  subject  to,  and  not  members  of  the  board,  nor  participate  in  its 
meetings,  except  when  called  upon  to  do  so;  and  the  same  rule  shall 
govern  the  appraisers. 

4  The  manager  shall  manage  the  affairs  of  the  association,  sub- 
ject to  the  instructions  of  the  board  of  directors;  the  cashier  shall 
perform  the  usual  duties,  and  the  secretary  shall  have  charge  of  all 
the  documents,  see  that  all  mortgages  are  duly  recorded  before  certi- 
ficates are  furnished  by  the  association,  and  keep  an  account  of  the 
blank  certificates  received  from  the  General  Clearing-House  Associ- 
ation, the  disposition  of  the  same,  the  cancellation  of  all  certificates 
returned  to  the  association  and  the  transmission  of  all  such  canceled 
certificates  to  the  General  Clearing-House  Association. 

5  The  board  of  directors  shall  instruct  and  authorize  the  cashier 
to  collect  an  assessment  upon  the  stock, and  proceed  to  carry  out  the 
instructions  set  forth  in  the  articles  of  incorporation  and  these  by- 
laws;  but  no  stockholder  shall  be  assessed  more  than  the  par  value 
of  his  stock. 

6  Each  subscriber  to  the  stock  shall  pay  fifty  cents  at  the  time 
he  subscribes,  and  shall  be  given  a  receipt  for  the  same,   signed  by 


l86  THE    NEW    PHILOSOPHY    OF    MONEY 

Alfred  B.  Westrup,  who  shall  be  temporary  secretary;  the  said  fifty 
cents  to  pay  temporary  expenses,  and  the  same  shall  be  considered 
an  advance  payment  on  the  stock  subscribed  for. 

7  The  boards  of  directors  and  appraisers  shall  employ  secretar- 
ies of  their  own.  The  board  of  directors  shall  fix  the  salaries  of  the 
ofiicers  and  employees,  and  shall  employ  a  legal  advisor,  who  shall 
be  general  counsel  for  the  association,  and  shall  pass  upon  the  legal- 
ity of  all  securities  taken  by  the  association. 

8  The  board  of  directors  shall  apply  to  the  General  Clearing- 
House  Association  as  soon  as  it  is  organized,  for  certificates  of  credit 
of  all  denominations,  and  shall  always  furnish  new  certificates  for 
torn  or  soiled  ones,  when  requested,  free  of  charge. 

9  The  board  of  appraisers  shall  first  pass  upon  all  securities  be- 
fore certificates  are  loaned  by  the  association. 

10  Any  person  may  become  a  member  of  the  association  and 
borrow  its  certificates  by  pledging  unincumbered,  improved  real  es- 
tate, never  vacant  lands,  situated  within  the  corporate  limits  of  Min- 
neapolis, or  in  the  immediate  neighborhood  thereof;  or  commodities 
not  immediately  perishable,  and  delivered  to  the  keeping  of  the  asso- 
ciation. All  borrowers  shall  give  a  note  for  the  amount  furnished  in 
certificates,  but  no  note  shall  extend  beyond  one  year,  and  notes  se- 
cured by  the  more  perishable  commodities  shall  be  limited  in  the 
time  they  are  to  run  in  proportion  to  the  perishability  of  such  secur- 
ity. No  certificates  shall  be  loaned  by  the  association  upon  any 
other  conditions. 

11  Every  member  of  the  association  shall  bind  himself  in  due 
legal  form  to  receive  the  certificates  of  credit  issued  by  any  of  the 
associations  that  are  members  of  the  General  Clearing-House  Asso- 
ciation, of  which  this  association  is  a  member,  in  payment  of  debt 
and  in  exchange  for  commodities  and  services,  and  from  all  persons, 
at  their  face  value  and  without  discriminating  in  prices. 

12  Notes  falling  due  may  be  renewed  by  the  association,  sub- 
ject to  the  modification  which  a  new  valuation  may  require,  so  that 
there  is  always  ample  security. 

13  The  charge  which  the  association  shall  make  for  the  loans, 
and  for  the  insurance,  shall  be  determined  by,  and  if  possible,  not 
exceed  the  cost  of  the  same.  In  case  there  is  a  surplus  over  expense 
and  insurance,  the  same  shall  be  paid  back  to  the  borrowers  in 
equitable  proportion;  but,  in  order  to  provide  for  the  retirement  of 
the  capital  stock  of  the  association,  an  extra  one  per  cent  per  annum 
shall  be  charged  all  borrowers  who  are  not  stockholders,  which  as- 
sessment shall  constitute  a  sinking  fund  with  which  the  board  of 
directors  shall,  from  time  to  time,  take  up  the  capital  stock  and  can- 
cel the  same  until  it  is  all  retired;  at  which  time  this  assessment 
shall  cease. 

14  Any  member  may,  at  any  time,  have  his  property  released 
from  the  pledge,  and  be  himself  released  from  all  obligations  to  the 
association,  by  paying  his  note  or  notes  to  the  said  association.  A 
stockholder  who  is  not  a  borrower,  may,  at  any  time,  be  released 
from  all  obligations  to  the  association  by  notifying  the  manager  in 
writing,  but  thereby  forfeits  all  right  to  any  voice  in  the  manage- 
ment of  the  association. 

15  The  association  shall  receive  none  other  than  its  own  certi- 


APPENI>IX  1S7 

ficates  or  those  furnished  by  associations  that  are  members  of  the 
General  Clcaring-House  Association  hereinafter  mentioned.  The 
association  shall  render  each  day  a  statement  of  its  loans  the  day 
previous,  describing  the  property  pledged,  giving  the  owner's  name 
and  its  location,  with  the  appraiser's  valuation  and  the  amount  loaned 
on  it;  and  also  a  statement  of  the  notes  paid  and  mortgages  canceled 
during  the  same  period,  which  statement  shall  be  signed  by  the  man- 
ager, cashier  and  secretary.  A  copy  of  each  statement  shall  be  fur- 
nished to  anyone  on  application. 

16  This  association  shall  do  all  in  its  power  to  encourage  the 
organization  of  similar  associations  in  other  cities,  and  as  soon  as  five 
associations  have  been  organized  they  shall  proceed  to  organize  the 
General  Clearing-Iiouse  Association,  whose  object  shall  be  to  provide 
the  blank  certificates  of  credit  for  the  local  associations,  to  supervise 
and  correct  any  defects  in  the  method  of  conducting  the  business, 
and  examine  the  condition  and  management  of  such  associations  as 
shall  adopt  its  prescribed  rules  and  apply  for  membership  prior  to 
their  being  admitted,  to  the  end  that  there  may  be  uniformity  in  the 
exchangeability  of  such  certificates  throughout  the  whole  country. 

17  The  General  Clearing-House  Association  shall  assume  all 
loss  from  fire  or  otherwise  to  the  property  pledged,  and  also  to  the 
holders  of  certificates  from  depreciation  in  case  of  mismanagement 
or  fraud  on  the  part  of  any  local  association. 

18  To  meet  the  expenses  of  the  General  Clearing-House  Asso- 
ciation, and  also  to  provide  for  the  payment  of  the  losses  above 
mentioned,  each  local  association  shall  contribute  a  percentage  of 
the  rate  charged  the  borrower. 

19  Until  such  time  as  the  General  Clearing-House  Association 
shall  be  prepared  to  carry  the  insurance  of  property  pledged,  each 
association  shall  place  its  insurance  in  such  companies  as  the  board 
of  directors  may  designate. 

20  At  the  first  meeting,  the  members  shall  determine  how  often 
and  when  the  regular  meetings  of  the  association  shall  be  held,  make 
provision  for  calling  special  meetings,  and  how  many  shall  consti- 
tute a  quorum. 

21  Each  meeting  shall  elect  a  chairman  and  secretary,  and  a 
competent  stenographer  shall  be  employed  to  report  the  complete 
minutes  of  each  meeting. 

22  These  by-laws  may  be  amended  at  any  regular  meetmg  of 
the  members. 


EXPLANATION. 


The  object  in  forming  a  stock  company  first  is  to  pro- 
vide tlie  funds  necessary  to  defray  the  expenses  of  inaugu- 
rating the  movement.  It  is  readily  understood  that  no 
enterprise  can  be  commenced  without  money,  and  this  is  the 
means  taken  to  provide  it.  It  is  proposed  first  to  procure 
five  hundred  subscribers  to  the  capital  stock,  and  then  call  a 
meeting  of  the  subscribers  to  elect  the  directors  and  other 
officers,  incorporate,  issue  the  first  five  hundred  shares  of  the 


iSS  THE    NEW    PHILOSOPHY    OF    MONEY 

capital  stock  and  assess  the  same  only  as  funds  are  needed. 
Instead  of  immediately  issuing  certificates  of  credit,  it  is 
proposed  to  extend  the  work  until  we  have  organized  an 
association  in  at  least  five  or  six  cities.  This  delay  is  not 
altogether  undesirable.  It  will  afford  ample  time  for  all  the 
members  to  become  thoroughly  acquainted  with  the  methods 
and  advantages  of  this  new  system,  and  to  study  and  mature 
the  plan  that  shall  finally  be  adopted;  for  which  purpose 
regular  meetings  will  be  held.  Each  of  these  associations 
will  bear  its  share  of  the  expenses  of  carrying  on  the  propa- 
ganda work  and  establishing  the  General  Clearing-House 
Association.  If  we  meet  with  obstacles  in  the  way  of  our 
incorporating,  we  propose  to  keep  on  organizing  associations 
until  we  have  numbers  and  influence  enough  to  remove 
those  obstacles,  whatever  they  may  be,  unless  it  shall  be 
decided  to  proceed  without  incorporating,  which  can  only  be 
determined  by  a  concensus  of  opinion.  As  soon  as  this  point 
is  settled  either  by  having  become  incorporated  or  by  decid- 
ing to  proceed  without  incorporating,  and  the  General 
Clearing-House  Association  having  been  duly  organized  and 
domiciled,  it  shall  proceed  to  provide  the  certificates  of  credit 
and  furnish  them  to  the  local  associations  in  such  denomina- 
tions as  they  may  ask  for. 

The  General  Clearing-House  Association  shall  keep  an 
account  with  each  association  of  the  blank  certificates  fur- 
nished it  and  of  the  mutilated  and  canceled  ones  returned. 
The  mutilated  ones  being  those  that  are  presented  at  the 
oflice  of  any  association  as  unfit  for  circulation,  and  for  which 
new  certificates  are  given  in  exchange;  the  canceled  ones 
being  such  as  are  returned  to  the  associations  in  payment  of 
notes   that  have  matured. 

By  organizing  a  number  of  associations  and  the  General 
Clearing-House  Association  before  any  certificates  are  issued, 
we  overcome  the  great  obstacle  which  seems  to  present  itself 
to  the  minds  of  the  people  as  insurmountable,  and  which  is, 
that  a  paper  money  will  not  circulate  unless  it  is  made  legal 
tender   by    authority.*      The    New    Philosophy   of    Money 


*  What  is  the  meaning  of  the  term  "legal  tender,"  as  applied  to 
money?  "The  Century  Dictionary"  defines  it  as  "currency  which 
can  be  lawfully  used  in  paying  a  debt."  A  briefer  and  common  defini- 
tion is  "compulsory  circulation,"  and  this  is  the  term  applied  to  such 
money  habitually  in  most  South  American  countries,  curso  Jorzado. 


APPENDIX  1S9 

teaches  that  the  paper  medium  of  exchange  should  be  good 
enough  to  be  readily  accepted  on  its  merits,  in  which  case 
the  making  of  it  legal  tender  is  entirely  unnecessary.  By 
organizing  five  or  six  associations  and  the  clearing-house, 
practically  making  them  one  association,  before  any  certifi- 
cates are  issued,  they  are,  when  issued,  acceptable  by  any 
member  of  any  of  these  associations,  or  any  that  may  there- 
after orjranize  and  become  members  of  the  General  Clearing:- 
House  Association.  Now,  it  will  hardly  be  denied  that  pa- 
per money  that  is  acceptable  by  a  large  number  of  business 
and  professional  men  and  women  in  live  or  six  cities,  will 
also  be  gladly  taken  by  any  one  else  in  those  cities  (except, 
perhaps,  money-lenders),  because  they,  also,  can  pay  it  out 
to  those  who  are  members  of  the  association.  It  follows, 
also,  that  the  enormous  advantages  of  this  system,  when 
understood,  will  be  the  incentive  to  organize  associations  in 
every  cit3%  Its  benefits  are  not  confined  to  any  locality,  but 
are  universal;  if  it  is  a  good  system  anywhere  it  is  good 
everywhere,  and  therefore  will  rapidly  extend  itself  to  all 
cities. 

The  idea  of  borrowing  money  at  one  or  two  per  cent 
per  annum  is  too  much  of  a  good  thing  to  allow  it  to  go  beg- 
ging. When  it  is  known  all  over  the  country  that  the  plan 
is  matured  and  it  is  actually  contemplated  to  carry  it  into 
effect,  it  will  create  more  discussion  than  any  other  subject; 
and  when  it  is  put  into  practice  it  will  create  greater  excite- 
ment than  anything  that  ever  happened. 

There  will  be  no  need  for  expensive  machinery  to 
engrave  plates  to  print  the  certificates  from.  The  half-tone 
process  will  produce  finer  prints  and  facilitate  greater  safe- 


Edward  Atkinson,  in  a  recent  very  interesting  pamphlet,  cites  legal 
tender  among  some  examples  of  words  of  which  the  ineaning  has 
been  perverted  to  the  vitiation  of  public  thought,  and  says  legal 
tender  should  be  defined  as  "an  act  by  which  bad  monej'^  rnay  be 
forced  into  use  so  as  to  drive  good  money  out  of  circulation."  He 
has  made  a  search  through  history  for  legal-tender  acts,  and  con- 
cludes from  his  discoveries  "that  no  decree  and  no  statute  of  legal 
tender  ever  originated  anywhere  except  for  the  purpose  of  forcing  a 
debased  coin  into  circulation,  or  for  the  purpose  of  collecting  a  forced 
loan  by  making  paper  substitutes  for  coin  a  legal  tender  for  debts."  . 
.  .  •  Good  money  needs  no  act  of  legal  tender  to  make  it  circu- 
late. Mr.  Atkinson  makes  an  unanswerable  argument  on  this  point 
by  citing  the  fact  that  the  great  international  commerce  of  the  world 
has  been  carried  on  from  its  beginning  to  the  present  time  without 
international  acts  of  legal  tender. — The  Century,  August. 


190  THE    NEW    PHILOSOPHY    OF    MONEY 

guards  against  counterfeiting  than  steel  engravings  possibly 
can. 

It  is  asserted  now  without  any  fear  that  it  will  prove 
untrue,  that  from  the  start  these  certificates  of  credit  will  be 
accepted  as  good  money  anywhere.  But  there  will  be  no 
need  of  sending  this  money  off  to  a  distance.  In  the  first 
place  it  will  not  come  into  circulation  all  of  a  sudden,  the 
present  money  disappearing  as  suddenly.  No  one  will  be 
likely  to  have  all  his  customers  bringing  him  nothing  but 
certificates  of  credit,  and  for  some  time  there  will  be  a  mixed 
currency  of  both  the  present  money  and  the  new,  affording 
an  opportunity  to  use  the  former  where  it  may  be  doubtful 
about  the  acceptability  of  the  latter.  In  the  second  place,  as 
the  certificates  will  be  accepted  by  a  large  number  of  busi- 
ness people  on  the  same  terms  as  the  present  money,  it  will 
naturally  be  an  easy  matter  to  exchange  the  one  for  the 
other  in  those  fev/  cases  where  the  individual  must  have  the 
kmd  he  does  not  happen  to  possess;  and  as  the  system  ex- 
tends the  need  of  making  such  exchanges  will  become  less 
frequent. 

I  am  sometimes  asked:  "But  will  not  the  government 
stop  you  from  issuing  these  certificates  of  credit?"  No  doubt 
it  will  try  to,  because  it  is  the  tool  of  the  money  power.  But 
what  of  it?  Shall  we  abandon  liberty  because  a  lot  of  offi- 
cials take  it  into  their  heads  to  deprive  us  of  it?  If  this  sys- 
tem has  the  merits  we  claim  for  it,  and  if  the  majority  can 
rule  in  this  country  when  they  decide  to,  it  is  only  a  question 
of  convincing  the  majority  of  its  merits  to  be  free  from  gov- 
ernment interference.  In  the  meantime,  the  more  govern- 
ment interference  the  more  it  will  advertise  the  system  and 
the  sooner  we  shall  get  the  majority  on  our  side.  Finally,  if 
this  is  the  only  road  to  prosperity  and  happiness  (and  that  is 
what  we  claim),  we  must  either  travel  this  road  or  give  up 
hope  and  resign  ourselves  to  the  slavery  we  now  have  to 
endure. 

It  may  at  first  appear  strange  to  some  that  the  stock  is 
to  bear  no  interest  nor  be  entitled  to  dividends;  but  upon 
mature  consideration  they  will  see  that  this  is  a  mutual  asso- 
ciation, and  to  pay  interest  or  dividends  to  members  of  a 
mutual  association,  where  the  business  is  transacted  only  with 
members,  is  like  taking  money  out  of  one  pocket  and  putting 
it  in  another  pocket.  The  object  of  the  association  is  to  pro- 
vide that  instrument  of    exchansre    which  we  must  all    use 


APPENDIX 


191 


more  or  less,  and  the  supply  of  which,  in  accordance  with 
equitable  principles,  is  indispensable  to  prosperity;  and  those 
who  desire  prosperity  are  asked  to  loan  a  few  dollars  to  meet 
the  expenses  of  starting  the  association;  the  same  to  be  re- 
turned to  them  out  of  a  sinking  fund  to  be  created  for  that  pur- 
pose; so  that  the  cost  of  starting  will  be  equitably  distributed. 

Those  who  do  not  loan  any  money  to  the  association  by 
taking  some  of  its  stock,  will  have  to  pay  a  trifle  higher  rate 
of  interest  when  they  borrow.  This  extra  charge  will  be 
set  apart  as  the  sinking  fund  with  which  the  capital  stock 
will  be  taken  up  and  canceled.  The  association  will  then  be 
purely  mutual,  reducing  its  charges  to  actual  cost. 

It  is  to  the  interest  of  all  to  facilitate  the  initiation  of 
this  method  of  supplying  the  medium  of  exchange,  because 
it  will  inaugurate  perpetual  prosperity,  and  annihilate  all 
monopoly  and  political  knavery. 

Great  care  has  been  exercised  in  the  preparation  of  the 
foregoing  plan,  but  it  is  not  proposed  as  one  that  will  require 
no  modification  when  finally  adopted ;  some  slight  changes 
may  be  found  necessary  in  order  to  meet  the  requirements  of 
the  law,  or  those  of  an  unincorporated  association  if  such  is 
decided  upon,  but  which  will  not  affect  the  results. 

The  writer,  who  has  been  an  advocate  of  this  system  for 
twenty  years,  has  devoted  the  last  five  to  efforts  for  its  reali- 
zation, and  is  more  hopeful  than  ever  of  its  speedy  accom- 
plishment, because  of  the  prospect  that  there  will  soon  be  a 
very  thorough  investigation  into  its  merits  by  a  large  number 
of  thinking  people. 

Money  reform  has  become  absolutely  indispensable  to 
save  us  from  continued  hard  times  or  civil  war,  and  this  is 
the  only  system  that  will  stand  the  test  of  scientific  investi- 
gation. 

It  is  very  important  that  all  who  become  interested  in 
this  movement  should  communicate  at  once  with  the  secre- 
tary, and  they  are  earnestly  solicited  to  do  so.  Any  criti- 
cisms or  suggestions  will  be  gratefully  received,  duly  con- 
sidered and  promptly  answered. 

It  will  be  necessary  to  publish  a  weekly  paper  to 
represent  and  defend  the  movement  as  soon  as  the  first  asso- 
ciation is  organized.  This  will  greatly  increase  the  oppor- 
tunity for  informing  the  people  as  to  the  object  and  methods 
of  the  system,  which,  intentionally  or  not,  will  no  doubt  be 
misrepresented. 


192  THE    NEW    PHILOSOPHY    OF    MONEY 

Let  the  reader  bear  in  mind  that  the  establishment  of 
this  system  means  nothing  less  than  a  complete  emancipation 
from  tyranny,  the  inauguration  of  prosperity,  the  abolition 
of  poverty.  Not  that  this  alone  will  do  it,  of  course,  but 
this  is  necessarily  the  first  step,  and  will  make  others  possible 
which  would  otherwise  be  impossible;  even  the  land  ques- 
tion (it  can  be  demonstrated  in  an  unanswerable  manner) 
cannot  be  settled  until  the  money  question  is  settled.  The 
money  power  and  interest  must  be  destroyed,  and  the  Mutual 
Credit  System  is  the  only  weapon  that  can  do  it. 

It  will  be  a  great  help  to  the  cause,  and  facilitate  propa- 
ganda work  for  each  one  in  any  town  or  city  who  is  in  favor 
of  this  money  reform,  to  know  who  else  in  that  locality  is  in 
sympathy  with  it.  I  therefore  propose  that  each  one  send 
their  name  and  address  to  me.  By  so  doing  they  can  be  put 
in  communication  with  each  other.  A  representative  of  this 
movement  is  needed  in  every  city  and  town  in  the  country  to 
organize  a  Mutual  Credit  Association.  It  will  afford  a 
greater  opportunity  for  advancement  than  anything  that 
anyone  can  engage  in,  and  certainly  none  ought  to  be  better 
paid,  seeing  that  it  is  the  most  important  to  the  human  race 
of  anything  ever  contemplated.  Any  good  business  man  or 
woman  can,  by  communicating  with  me,  obtain  all  the  infor- 
mation they  need  to  commence  to  form  an  association,  get- 
ting large  remuneration  as  the  work  proceeds. 

Let  some  one  in  each  town  and  city  start  in  at  once  to 
organize  an  association  and  get  the  subscribers  to  the  capital 
stock;  the  more  associations  that  are  organizing  the  easier 
and  more  rapid  will  be  the  work.  As  soon  as  the  General 
Clearing-House  Association  is  organized  and  furnishing  the 
certificates  of  credit,  the  organization  of  a  local  association 
will  be  a  work  of  a  few  days.  So  that  after  it  is  in  opera- 
tion it  will  rapidly  extend  itself  to  every  town  and  city,  not 
only  of  this  country,  but  of  the  civilized  world.  A  move- 
ment similar  to  this  one  has  already  been  started  in  London, 
England,  called  "The  Free  Currency  Propaganda."  Some 
of  the  leaders  are  able  writers;  their  literature  is  in  harmony 
with  The  New  Philosophy  of  Money,  and  their  work  bids 
fair  to  outstrip  us  in  results. 

There  are  plenty  of  shrewd  capitalists  who,  when  they 
see  that  this  system  is  being  pushed,  that  it  is  not  only  to  the 
best  interest  of  all  to  establish  it,  but  that  it  is  inevitable,  will 
themselves  come  to  the  front  and  help  inaugurate  it. 


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